2002 (10) TMI 109 - HC - Customs

Summary

Issues Involved:
1. Whether the drawback is allowable in terms of Rule 13(2)(iv) of the Drawback Rules, 1995, given the invalid insurance certificate submitted by the exporters.

Summary:

Issue: Drawback Allowability u/r 13(2)(iv) of the Drawback Rules, 1995

1. Background and Contracts:
- M/s. Terai Overseas Limited (TOL) entered into a contract with M/s. Avia Exports, Moscow, and subsequently with M/s. Dugar Impex Pvt. Ltd. and M/s. Aruna Impex Pvt. Ltd. for manufacturing and exporting garments.
- Duty Drawback was to be assigned to TOL by the manufacturers/exporters.

2. Export and Drawback Claims:
- M/s. Dugar Impex and M/s. Aruna Impex exported consignments and filed Duty Drawback Claims with Customs authorities.
- TOL claimed the Drawback on behalf of these firms, asserting the exports were made on its behalf.

3. Show Cause Notice and Allegations:
- A show cause notice was issued alleging that M/s. Dugar Impex and M/s. Aruna Impex were fictitious firms and that TOL imported rags misdeclared as high-value garments.
- The insurance certificate was canceled by the Insurance Company, leading to allegations of contravention of the Customs and Central Excise Duty Drawback Rules, 1995.

4. Replies and Contentions:
- M/s. Dugar Impex and M/s. Aruna Impex confirmed their contracts with TOL and asserted their existence as juristic persons.
- TOL contended that the cancellation of the insurance policy was an illegal act by the Insurance Company and that they had settled the matter with the Insurance Company.

5. Commissioner of Customs' Decision:
- The Commissioner of Customs rejected the claims, declaring the firms fictitious and stating TOL had no locus standi.
- However, no evidence was found that the exported goods were of dubious quality, and the penalty proposal was dropped.

6. CEGAT's Findings:
- CEGAT held that under Rule 14 of the Drawback Rules, the drawback is payable to the exporter or its agent.
- The Tribunal found that the goods were indeed exported by M/s. Dugar Impex and M/s. Aruna Impex, and these firms were not non-existent.
- CEGAT ruled that the failure to produce information on their own cannot be the basis for holding that Rule 9(c) was contravened.

7. Insurance Certificate Issue:
- The Tribunal noted that the insurance certificate was initially attached but later canceled by the Insurance Company, with the matter being settled subsequently.
- The Tribunal concluded that this dispute did not constitute a contravention of Rule 13(2)(iv).

8. Court's Interpretation of Rule 13:
- The Court emphasized that Rule 13(2) uses "should" instead of "must" or "shall," indicating a non-mandatory requirement.
- Rule 13(3) provides for a deficiency memo if the claim is incomplete, allowing the exporter to rectify deficiencies.
- No deficiency memo was issued in this case, making the claim under Rule 13(2) not incomplete.

9. Legal Precedents and Liberal Interpretation:
- The Court cited various judgments emphasizing liberal construction of procedural rules to further the main purpose of the Act, which is to boost exports.
- The Court held that the requirement of Rule 13(2)(iv) is not mandatory and that the Tribunal's decision was correct.

10. Conclusion:
- The Court answered the question against the applicant and in favor of the respondents, allowing the drawback claim.
- The reference application was dismissed with no order as to costs.

Separate Judgment:
- Hrishikesh Banerji, J. concurred with the judgment.