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TMI Blog2014 (9) TMI 145X X X X Extracts X X X X X X X X Extracts X X X X ..... der-in-Appeal dated 27th September, 2012 passed by the Commissioner of Central Excise (Appeals)-(Respondent No.3) and the orders / letters dated 19th April, 2012, 11th June, 2012 and 24th July, 2012 issued by the Additional Commissioner (BRU) of Central Excise, Pune-I-(Respondent No.5) 3. The short question that arises for our consideration is whether the Petitioner, at the time of export of the goods, having claimed/granted drawback at the All Industry Rate under Rule 3 of the Drawback Rules, is entitled to make an application seeking determination of the Brand Rate of drawback in terms of Rule 7 thereof and claim the differential amount. 4. Before proceeding further, we need to deal with the preliminary objection raised with reference to the maintainability of this Writ Petition. Mr. Jetly, the learned counsel appearing on behalf of the Respondents, submitted that the present Writ Petition is not maintainable and/or ought not to be entertained, as the Petitioner had not exhausted the alternate remedies available to it under the provisions of the Customs Act, 1962 (the Act). In particular, Mr. Jetly submitted that under the provisions of section 129DD of the Act, the Petitioner ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ring on behalf of the Petitioner, that in the peculiar facts and circumstances of the present case, availing of the alternate remedy would be an exercise in futility because the revisional authority (under section 129DD) had already decided this issue on merits in the case of one Sandvik Asia Pvt. Ltd., and which has been relied upon by the Respondent No.3 in the order impugned herein. For all the aforesaid reasons, the preliminary objection is therefore rejected and we proceed to entertain the Writ Petition on merits. 5. Having rejected the preliminary objection, we now turn our attention to the undisputed facts of the case. The Petitioner is engaged in the business of manufacturing and export of dutiable, excisable goods. For the purpose of manufacture of finished goods, the Petitioner imports various inputs on payment of duty. The Petitioner also procures inputs from indigenous sources on payment of applicable duties. The finished goods are either cleared in the domestic market or exported out of India. The exports out of India are made under claim for duty drawback available under section 75 of the Customs Act, 1962 read with Drawback Rules. At the time of export of the finish ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... reject the applications filed by the Petitioner under Rule 7 of the Drawback Rules on the ground that the Petitioner had already claimed drawback at the All Industry Rate under Rule 3 and hence the Petitioner was not entitled to now make applications under Rule 7 seeking determination of the Brand Rate of drawback for the very same exports. In light of the aforesaid, Respondent No.5 by his orders/letters dated 19th April 2012, 11th June 2012 and 30th July 2012 rejected all the applications filed by the Petitioner for fixation of Brand Rate of drawback under Rule 7. These orders/letters have been impugned in this Writ Petition. 9. Being aggrieved by the said orders/letters of Respondent No.5, the Petitioner filed Appeals before Respondent No.3 without any success. By his order dated 27th September 2012, Respondent No.3 upheld the rejection of the applications filed by the Petitioner and consequently rejected the Appeals. In the said order, Respondent No.3 relied upon the order passed by the Government of India, Joint Secretary in the case of one Sandvik Asia Pvt. Ltd. involving the identical issue, as well as upon the Circular dated 30th December, 2011 issued by the CBEC. 10. It i ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ated 30th December 2011, and in particular, paragraph (d) thereof, was required to be struck down by this Court under Article 226 of the Constitution of India. Consequently, the orders impugned in this Writ Petition, and which primarily relied upon the said Circular for rejecting the applications of the Petitioner seeking determination of the Brand Rate of drawback under Rule 7, also have to be set aside. 13. On the other hand, Mr. Jetly, the learned counsel appearing on behalf of the Revenue, submitted that once the exporter avails of the All Industry Rate of drawback as notified under Rule 3, he is deemed to be satisfied with the drawback availed of by him. He is thereafter barred from making any application seeking determination of the Brand Rate of drawback under Rule 7. He submitted that this was the case even if the All Industry Rate of drawback granted under Rule 3 was less than 4/5th (80%) of the duties and taxes paid on the inputs / input services used in the production or manufacture of the exported goods. Keeping in line with the aforesaid argument, Mr. Jetly submitted that the exporter has to decide at the time of the export of the goods whether he wants to claim drawb ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... i) the payment of drawback of the amount of duty actually paid on the imported materials etc.; (ii) specifying the goods in respect of which no drawback would be allowed; (iii) specifying the procedure for recovery or adjustment of any amount of drawback which has been allowed under sub-section (1) or interest chargeable thereon; (iv) production of such certificates, documents and other evidence in support of each claim of drawback as may be necessary; (v) requiring the manufacturer or other person carrying on any process or other operation on the said goods, to give access to every part of his manufactory, to any Officer of Customs, for the purpose of inspection and verification; and (vi) the manner and the time within which the claim for payment of drawback may be filed. The mandate of section 75 is really to neutralize the incidence of tax on export of goods. The purpose of the section appears to be that taxes are not exported out of India and the exports of Indian goods are not put to a disadvantage and remain competitive in the fiercely competitive in international market. 17. Pursuant to the powers granted to the Central Government under subsection (2) of section 75, t ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... materials or excisable materials or taxable services in respect of which duties or taxes have not been paid, or (iii) on jute batching oil used in the manufacture of export goods, namely, jute (including Bimlipatam jute or mesta fibre), yarn, twist, twine, thread, cords and ropes; (iv) if the said goods, being packing materials have been used in or in relation to the export of - (1) jute yarn (including Bimlipatam jute or mesta fibre), twist, twine, thread and ropes in which jute yarn predominates in weight; (2) Jute fabrics (including Bimlipatam jute or mesta fibre), in which jute predominates in weight; (3) jute manufactures not elsewhere specified (including Bimlipatam jute or mesta fibre) in which jute predominates in weight); (v) on any of the goods falling within heading 1006 or 2523 of the First Schedule to the Customs Tariff Act 1975 (51 of 1975); (2) In determining the amount or rate of drawback under this rule, the Central Government shall have regard to - (a) the average quantity or value of each class or description of the materials from which a particular class of goods is ordinarily produced or manufactured in India; (b) the average quantity or value of the ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ubject to the provisions of (a) the Customs Act, 1962 and the Rules made thereunder; (b) the Central Excise and Salt Act, 1944 and the Rules made thereunder; (c) the Finance Act, 1994 and the Rules made thereunder; and (d) the Drawback Rules, a drawback may be allowed on the export of goods at such amount, or at such rates, as may be determined by the Central Government. This is obviously, subject to the other provisions set out in Rule 3. 20. Rule 4 deals with the revision of rates and empowers the Central Government to revise the amounts or rates determined under Rule 3. Rule 5 deals with the determination of the date from which the amount or rate of drawback is to come into force and the effective date for application of the amount or rate of drawback. Rule 6 deals with goods where the amount or rate of drawback has not been determined. In effect, Rule 6 comes into play where no All Industry Rate is determined under Rule 3 in respect of any goods. Thereafter comes Rule 7 and with which we are really concerned. Rule 7 deals with goods where the amount or rate of drawback determined is low, and reads as under :- "RULE 7. Cases where amount or rate of drawback determined is low - ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... in the manner and subject to the conditions specified in clauses (b) and (c) of sub-rule (2) and sub-rule (3) of rule 6, subject to the condition that bond required to be executed by the claimant shall only be for the difference between amount or rate of drawback determined under rule 3 or, as the case may be, revised under rule 4 by the Central Government and the provisional drawback authorised by the Commissioner of Central Excise or the Commissioner of Customs and Central Excise, as the case may be, under this Rule; (4) ....... (5) ......." (emphasis supplied) 21. In a nutshell, what Rule 7(1) stipulates is that where in respect of any goods, the manufacturer or exporter finds that the amount or rate of drawback determined under Rule 3 or as the case may be, revised under Rule 4, is less than 4/5th (80 %) of the duties or taxes paid on the inputs/ input services used in the production or manufacture of the said goods, he may within sixty days, subject to the other conditions laid down therein, make an application in writing to the Commissioner of Central Excise or the Commissioner of Customs and Central Excise, for determination of the amount or rate of drawback thereof sta ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... applied for the grant of the All Industry Rate of drawback under Rule 3. Secondly, Rule 7 categorically provides that where in respect of any goods, the manufacturer or exporter finds that the amount or rate of drawback determined under Rule 3 is less than 4/5th of the duties or taxes paid on the inputs/input services used in the production or manufacture of said goods, he may make an application within sixty days for determination of the amount or rate of drawback thereof under Rule 7, disclosing all the relevant facts and subject to the other conditions stipulated under Rule 7. The word "finds" appearing in Rule 7 after the words "manufacturer or exporter", ex-facie indicates that it is only once the manufacturer or exporter comes to the conclusion that the amount or rate of drawback determined under Rule 3 is less than 4/5th of the duties or taxes paid on the inputs/input services used in the production or manufacture of the exported goods, can he make an application for determining the Brand Rate of drawback under Rule 7. There could certainly be instances where the manufacturer or exporter would not, at the time of export, be able to determine and/or come to the conclusion th ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... anted drawback at the All Industry Rate as determined under Rule 3. Our view also finds support in the language of the First proviso to Rule 3(1) and far from any prohibition in applying for Drawback in terms of Rule 7. Rule 7 comes into play only in cases where the amount or rate of drawback is low and not otherwise. The apprehension of Mr Jetly is taken care of by the clear language of Rule 7(1) and the use of the words "determined under Rule 3" or "revised under Rule 4". It is also taken care of by the wordings of subrule 3 of Rule 7. 25. Having held so, we now turn our attention to the Circular dated 30th December, 2011 issued by the CBEC. The relevant portion of said Circular reads as under :- "2. On examining the matter it is noted that : (a) As per Rule 7 of the Drawback Rules, 1995, if the exporter finds that the amount or rate of Drawback determined under notified AIR drawback under rule 3 or 4 is less than four fifth of the duties and taxes suffered on inputs / input services used in manufacture of export goods, he may within specified period apply before the jurisdictional Central Excise Commissioner for determination of amount or rate of drawback (Brand Rate). Here, ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... re clearly not provided for in the Rules and has the effect of whittling down the Drawback Rules. Under the garb of clarifying the Rules, the CBEC cannot incorporate a restriction / limitation, which does not find place in the Drawback Rules. In clause (d) of the Circular cannot be reconciled with clauses (b) and (c) thereof. Hence, read together and harmoniously it will have to be held that the Circular cannot override the Rules and particularly Rules 3 and 7 of the Drawback Rules and the subrules thereunder. This being the case, clause (d) of the said Circular is clearly unsustainable and has to be struck down. On the same parity of reasoning, and more so because the orders/letters impugned herein, rely upon the said Circular to reject the applications of the Petitioner seeking determination of the Brand Rate of drawback under Rule 7, even the said impugned orders/letters will have to be set aside. 27. In view of our discussion in this judgment, clause (d) of the said Circular dated 30th December, 2011 issued by the CBEC as well as the impugned orders dated 27th September 2012 issued by Respondent No.3, and the orders / letters dated 19th April 2012, 11th June 2012 and 24th July ..... X X X X Extracts X X X X X X X X Extracts X X X X
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