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TMI Blog2014 (8) TMI 255X X X X Extracts X X X X X X X X Extracts X X X X ..... orm, whose manufacturing came to a standstill due to a breakdown of some of their machinery. Since the machine was unavailable in the domestic market and its procurement was causing a halt in the functioning of the factory, the petitioner's supplier agreed to send the machinery so that production could continue. The usual practice was to temporarily deploy this machine on rent. The petitioner thus imported the equipment through bill of entry no. 1394934 dated 25.5.2007, under the declaration "Trial Basis to be Exported", for which a rental amount of Rs. 4,78,920/- was agreed to between supplier and petitioner. On import, necessary duty, additional duty, education cess, CVD and S&H Education Cess amounting to Rs. 11,69,640/- was paid, with the declaration that the equipment would be re-exported to the supplier under Section 74 of the Customs Act. The petitioner claimed CENVAT credit amounting to: a. Rs. 3,34,093/- comprising of 50% excluding Additional Customs Duty Import, (i.e. Basic Excise Duty Rs. 3,24,362/- + Ed. Cess Rs. 6,487/- + S&H Cess Rs. 3,244/-) for financial year 2007-08 in entry No. 1, in CENVAT credit register dated 31.05.2007, and b. Rs. 5,24,143/-, comprising of r ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... od for claiming drawback lapsed and now a claim for drawback can only be made after the second respondent relaxes the provision on the time limit under Rule 7A, the petitioner represented as required, on 26.10.2009. Simultaneously, a letter was written to the second respondent requesting that the matter be kept in abeyance, on account of the representation, on 15.12.2009. The second respondent then wrote to the CC(E), marking a copy to the petitioner, on 9.11.2009 requesting a report on the petitioner's representation. The petitioner responded with a copy of the representation on 30.11.2009 with all relevant documents to enable the CC(E) to send the report to the second respondent. On failure of the CC(E) to send the report, the Petitioner sent another letter on 2.2.2010; likewise, the Government of India sent a letter on 25.3.2010 to the CC(E), requesting that the report be sent. The CC(E) wrote back on 5.7.2011 asking the petitioner to forward a copy of the original letter dated 26.10.2009 in order to enable them to prepare the report and send it to the Ministry. The petitioner responded by its letter of 23.7.2011 accordingly. 8. In the meantime, a show cause notice dated 1.5.20 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... omplying with bond procedure was akin to removal without payment of duty, since the second respondent authorities were aware that the imports were made under the claim of drawback. The issue of removal of the export goods was not in question before the second respondent, since the petitioner had received the drawback after proper scrutiny of documents. The petitioner further argues that the respondent is mistaken in its assumption that the petitioner's actions lacked bona fides as allegedly evident from the petitioner's intention to consciously gain 5% financial advantage accruing from retaining 100% of the CENVAT credit, since reversal of credit at the time of removal of the goods would only result in a 95% drawback. It is submitted by the Petitioner that if it had possessed such knowledge of the CENVAT Credit Rules, it would not have wrongfully claimed CENVAT credit of the excise duty on the re-exported goods. The petitioner fourthly urges that the respondent is also wrong in its assumption that the utilization of balance credit on 30.7.2007 (when the good was removed from the factory) was with the knowledge that full CENVAT credit on capital goods is allowed in the same financia ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... n three months from the date on which an order permitting clearance and loading of goods for exportation under Sec. 51 is made by proper officer of customs : Provided that the [Assistant Commissioner of Customs or Deputy Commissioner of Customs] may, if he is satisfied that the exporter was prevented by sufficient cause to file his claim within the aforesaid period of three months, allow the exporter to file his claim within a further period of three months. xxx xxx xxx 16. Rule 7A reads: 7A. Power to relax. - If the Central Government is satisfied that in relation to the export of any goods, the exporter or his authorised agent has, for reasons beyond his control, failed to comply with any of the provisions of these rules, and has thus been entitled to drawback, it may, after considering the representation, if any, made by such exporter or agent, and for reasons to be recorded in writing, exempt such exporter or agent from the provisions of such rule and allow drawback in respect of such goods. 17. The essence of this dispute is that the petitioner wrongly availed of CENVAT credit in 2007, which came to its notice after the audit by the Excise Commissionerate as early as 2009 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ntrary to Rule 3(5) of the CENVAT Credit Rules. This Court thus need not labour to discern that the petitioner had willfully retained the CENVAT credit from November 2009, when its wrongful utilization was brought to its notice, all the way up to May 2012. During this period, this credit could have in all probability been used by the petitioner for whatever purposes necessary, as all availed credit accumulates in the CENVAT credit account, which is a common account used to pay service tax, central excise duty etc. Such wrongful utilisation of CENVAT credit amounts to a loss to the Revenue, as tax owed to the Revenue is in effect being withheld. 20. It is a settled principle that a party seeking relief must come to the Court with clean hands. See S.P. Chengalvaraya Naidu (dead) by L.Rs v: Jagannath (dead) by L.Rs. and others, (1994) 1 SCC 1. The petitioner is before this Court for the relief of time-relaxation, so that it may claim duty drawback. It is sought to be argued on its behalf that it could not claim drawback within 3 months of the date of re-export, in July 2007 since it was only made aware of the wrongful claim of CENVAT credit in November 2009, about a year and a half a ..... X X X X Extracts X X X X X X X X Extracts X X X X
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