TMI Blog2014 (10) TMI 329X X X X Extracts X X X X X X X X Extracts X X X X ..... vailable only on imported materials used in manufacture of final product. In this case the impugned goods were capital goods i.e. imported second hand machinery on which some operations were claimed to be carried out. Whereas the applicant had no Central Excise Registration for manufacture of such machines. No imported materials were used in processing of impugned goods so as to make the impugned goods eligible for drawback under Section 75 of the Customs Act, 1962. The export of imported machines by carrying out mere reconditioning/refurbishing operation without complying with substantial requirements of said Section 75, renders the said drawback claims inadmissible under Section 75. There is specific provision of claiming drawback on re-exported goods under Section 74 which applicant has failed to avail. Applicant has heavily relied upon Circular No. 57/95-Cus., dated 30-5-1995, wherein the scope of Section 75 has been enlarged to include admissibility even for goods processed or on which any operation has been carried out in India, in view of the definition of manufacture. Government observes that any such enlargement of scope of Section 75 has to be seen in light of basic pr ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... uninstalled press machines, the applicants carried out various operations viz. refurbishing, painting, modifications, rewinding works, etc. and thereafter, the same were exported in CKD/SKD condition by classifying them under Customs Tariff Item 8462 29 10, under UT-1 Bond, under claim of Duty Drawback. Then, the applicants filed seven applications before the Additional Commissioner (BRU), Central Excise, Pune-I Commissionerate on 9-6-2011 for determination of Brand Rate under Rule 7 of Customs, Central Excise and ST Duty Drawback Rules, 1995 (hereinafter referred to as the Drawback Rules, 1995 ) in respect of seven press machines exported for a total FOB Value of ₹ 40,62,68,255/-. The amount of drawback claimed by the applicants is ₹ 2,18,50,325/-. It was pointed out by the department that applications filed by the applicants for determination of Brand Rate under Rule 7 of the Drawback Rules, 1995 for seven machines exported did not appear to be in conformity with the provisions of Section 75 of the Customs Act, 1962 and Rule 2 of the Drawback Rules, 1995 on the grounds that the applicants have imported Capital Goods under EPCG Scheme, subsequently withdrew them from ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... The Gujarat High Court on the case of Nirma Chemical Works v. UOI - 1981 (8) E.L.T. 617 Collector of Central Excise v. Rajasthan State Chemical Works - 1991 (55) E.L.T. 444 (S.C.) Chowgule Co. - AIR 1981 SC 1014 = 1993 (67) E.L.T. 34 (S.C.) Om Prakash Gupta v. CCT - (1965) 16 STC 935 Saraswati Sugar Mills v. Haryana State Board - (1992) 1 SCC 418 = 426 AIR 1992 SC 224 The provisions relating to Drawback in the Customs Act, 1962 and Customs and Central Excise Duties Drawback Rules, 1995 by the Finance Act, 1995, C.B.E. C. had issued clarification vide Circular 57/95-Cus., dated 30-5-1995 which reads as under : Enlargement of the Scope (1) Drawback under Section 75 will now be admissible even for goods processed or on which any operation has been carried out in India, in view of the definition of manufacture . In view of above circular, once any operations are carried out on any goods it shall be construed as manufacturing activity been taken place and subsequently if it is entered for export than duty drawback under Section 75 of the Customs Act, 1962 shall be admissible. 4.3 In the present case the applicant ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... s the process of reconditioning or refurbishment which is process of manufacture. 4.4 The term imported materials is defined under Rule 2(d) of the said Rules which reads as follows : (d) imported material means any material imported into India and on which duty is chargeable under the Customs Act, 1962 (52 of 1962); It will be evident that the above does not make any distinction of the imported material into inputs or capital goods. The only criterion laid down is that material imported into India shall be chargeable to duty under the Customs Act. The term materials is much wider and includes all types of goods i.e. input as well as capital goods. The use of term materials was to extend the benefit of drawback of Customs duties paid on raw materials, consumables, components, semi-finished goods, capital goods, assemblies, sub-assemblies, intermediate goods, accessories, parts and packing materials required for manufacture of export goods. It is submitted that applicant has imported second hand mechanical press machines classifiable under Chapter 85 on which the applicant has paid applicable Customs Duty under the Customs Act which fulfills the definition imported ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... the same. Similarly in para 20 of the Order-in-Original the Addl. Commissioner has reproduced a table indicating FIFO wise details of DBK-I under which the applicant furnished details of payment of duty on imported capital goods. Accordingly in para 21 of the said order-in-original the Addl. Commissioner has concluded that the imported goods and the exported goods are one and the same on the ground that name of the export product and name of the imported machinery/capital goods are same. It is submitted that the Addl. Commissioner has failed to understand the meaning of manufacture imported goods defined under the said Rules. It will be evident from the submissions made in point 3 that the imported capital goods are imported goods as defined under the said Rule. Accordingly, the said findings of the Addl. Commissioner are completely erroneous. 4.6 The Addl. Commissioner in para 16 of the Order-in-Original observed that the machinery imported by the applicant were fully furnished and ready to be installed condition which did not required any processing for installation. Thus, the logical base available was either selling of the said machines in indigenous market or re-export o ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... applications have not been rejected on the grounds that the appellant did not file their application under Section 74 of the Customs Act, 1964. While discussing the options available to the appellants, a reference has been made to Section 74 of the Customs Act, 1964. However, detailed findings have been given for rejection of the applications/claims in the order. In their application for fixation of brand rate, they mentioned about the actual installation of only 4 machines, whereas, vide their letter dated 10-2-2012 they mentioned that they imported 11 mechanical press machines and out of which 4 machines were installed in the factory. This shows that they intentionally misled the Department. Further as the machines were imported under EPCG scheme, these were in ready to install/ready to use condition and did not require any further processing for installation and use. This being the factual position, the appellant declared that they undertook processes which resulted in nearly 500% value addition. CIF value of imports is ₹ 8,23,07,225/- whereas, FOB value of exports is ₹ 40,62,68,255/-. It does not appeal to any logical reasoning that the machinery imported and subseq ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... r the purpose of claiming drawback and that the custom duty paid on imported capital goods, which are materials in this case is rightly claimed as drawback under Section 75 of Customs Act, 1962. 10. Government notes that Chapter-X of the Customs Act, 1962 deals with statutory provisions for claim drawback of duty on exported goods. Section 74 governs the drawback of duty claim in respect of re-exported goods. Whereas Section 75 deals with duty drawback on imported materials used in the manufacture of goods which are exported. 10.1 The relevant Section 75(1) is reproduced below : Section 75. - Drawback on imported materials used in the manufacture of goods which are exported. - (1) Where it appears to the Central Government that in respect of goods of any class or description manufactured, processed or on which any operation has been carried out in India, being goods which have been entered for export and in respect of which an order permitting the clearance and loading thereof for exportation has been made under Section 51 by the proper officer, or being goods entered for export by post under Section 82 and in respect of which an order permitting clearance for exportation ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ture of goods which are exported. 10.3 The applicants are registered with Central Excise for manufacture of Motor vehicle chassis and parts thereof falling under Central Excise Tariff Heading 8708 99 00 and not for the capital goods/materials which are exported. However, they have claimed that the second hand machinery imported on payment of duty was subjected to processes like refurbishing, painting, modifications, rewinding works, etc. and the said processes carried out on said capital goods/machines amounts to manufacture or processing of goods, and the imported machinery is nothing but the imported material used in manufacture of machinery exported by them. Government notes that applicant has imported second hand capital goods/machinery namely S.H. Single action Mechanical Press in CKD/SKD condition and exported the machinery named as Refurbished single action mechanical press in CKD/SKD condition. The description of capital goods given in Bills of Entry and Shipping Bills exactly matches with each other. Similarly in drawback fixation application DBK-I statement the export product is mentioned as single action mechanical press in CKD/SKD condition and the imported materials ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... under EPCG schemes under EPCG license. This clearly shown that the goods imported were in ready to install and ready to use condition and did not secure any further processing for installation and use. This being the factual position, the applicant declared that they undertook process resulting into nearly 500% value addition, CIF value of import and FOB value of export was ₹ 8,23,07,225/- and ₹ 40,62,68,255/- respectively. It does not appeal to any logical reasoning that the machinery imported and subsequently re-exported resulting into 500% value addition. It is possible only if the exported goods are entirely different from imported goods. On the contrary the applicant claims that the goods imported and exported are the same. The FOB value of thee export goods declared by the applicant does not match with the claim of the applicant that the goods imported and exported are the same. This raises sufficient doubt about the genuineness of the information filed by the applicant. In depth scrutiny of the FIFO wise DBK-1 reveals that the manufacturer/exporter ahs misled the department by purposely remaining the imported capital goods in CKD/SKD condition as imported mate ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ydra-jack, which is identifiable as distinct goods, being special equipment to be used for the purpose of erection of different types of super-heavy articles, including an article like the Monolithic Buddha statue weighing 480 Metric Tons, was an easily identifiable goods within the meaning of Section 74 of the Customs Act, as such and the drawback of customs duty, allowable by the authorities concerned, had to be allowed in accordance with the provisions of Section 74 of the Customs Act. The High Court also held that since Hydra-jack, a specialized lifting and erection equipment, was imported and re-exported as such, by the appellant without being put to use in India, drawback is allowable at the rate of 98% of Customs duty paid and not at the reduced rate of 85%. In this case also, the machinery imported has been re-exported and therefore their case was covered under Section 74 subject to compliance of provisions of said section. In this case applicant has neither complied with the provisions of Section 74 nor claimed drawback under said section. 10.7 Government observes that the applicant has heavily relied upon Circular No. 57/95-Cus., dated 30-5-1995, wherein the sco ..... X X X X Extracts X X X X X X X X Extracts X X X X
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