TMI Blog2012 (8) TMI 898X X X X Extracts X X X X X X X X Extracts X X X X ..... e circulars are not relevant since the ground for rejection of drawback claim is as explained in para 8 above. However, Government finds no merit in contention of department that since, the applicant has not suffered any duties on their inputs, they are not eligible for Drawback claim. Here, Government is in agreement with the observation of Commissioner (Appeals) in this specific issue that AIR of Drawback cannot be denied/reduced by field formation as the same is fixed by Central Government taking into account all the relevant factors as stated in above said circulars. Circular No. 3/99-Cus., dated 3-2-1999 where in it has been clarified that drawback is admissible only against cash payment of duties and debit of duties against DEPB scrip on import of goods is in effect availment of exemption of duty and therefore no drawback is admissible when duty is paid on inputs by debit of DEPB Scrip. Department has also contested that Circular No. 41/2005-Cus., dated 28-10-2005 provides that additional customs duty paid through debit under DEPB shall also be allowed as brand rate of drawback and no clarification has been given in respect of AIR. Since, the respondents are claiming drawb ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ther and chemicals) are being procured indigenously as well as imported by them. Further, as per the customer s requirement they manufacture shoe uppers, full shoes, leather garments from the said finished leather in their factory and are being exported under claim for Drawback as Cenvat credit facility has not been availed by them. Imported raw leather i.e. wet chrome is fully and unconditionally exempted from payment of Customs duties in terms of Notification No. 21/2002-Cus. as amended. The chemicals viz., tanning agent, Synthetic fat liquors, binders, dyes and pigment used in the manufacture of finished leather are leviable to customs duties when imported into India. However, the respondent has availed the benefit of Notification No. 45/2002-Cus., dated 22-4-2002 covering Export Import Policy 2002-07 with effect from 1-4-2002 and Notification No. 96/2004, dated 17-9-2004 covering Foreign Trade Policy 2004-09 w.e.f. 17-9-2004 on all the chemicals imported through ICD, Pithampur. 2.2 As the imported raw leather is fully exempted from duty and that the chemicals required for processing of leather have been imported by the Respondent by availing the benefit of the exemption Noti ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... has been availed or not. In the instant case, all the articles of Leather namely Ladies Leather, Hand Bags and Footwear items namely, leather shoes, shoe uppers, leather sandals/boots and sandal/boot uppers for all categories (ladies/gents/children) exported by the respondents are manufactured from the raw leather which is imported duty free under the Notification No. 21/2002-Cus. and is covered under the Chapters 42 and 64 of the drawback schedule which is excluded from the drawback schedule. It is also confirmed that the respondent have not kept any separate record of end use from which it would be ascertained that imported synthetic tanning material have been used for finishing of imported leather which is used in the manufacturing of shoe and shoe uppers. 3.2 The Notification No. 45/2002-Cus., dated 22-4-2002 covering Export Import Policy 2002-2007 w.e.f. 1-4-2002 and Notification No. 96/2004, dated 17-9-2004 covering Foreign Trade Policy 2004-2009 issued under sub-section 25(1) of the Customs Act, 1962 (52 of 1962), which provides for exemption to goods imported into India from payment of whole of the Customs Duties leviable which is specified in the first schedule to the C ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... Delhi specifically provides that the Additional Customs Duty paid through debit under DEPB shall also be allowed as Brand Rate of Duty Drawback and no clarification has been given in respect of All India Industry Rate. Since, M/s. Tata International Ltd. are claiming the Drawback at All India Industry Rate, this Circular is not applicable to the present case and Circular No. 57/2004-Cus., dated 21-10-2004 relates to DEPB and not applicable for Drawback and Drawback Rules are independent of DEPB. Hence, this circular is not applicable In the instant case. Further, Circular No. 19/2005, dated 21-3-2005 does not speak about the admissibility of All Industry Rate Drawback to those exported goods which are manufactured by imported/indigenous inputs under DEPB. It is clarified regarding All Industry Rate of Duty Drawback which is to be denied/reduced on export goods using inputs some of which are non-duty paid. Hence, this Circular does not appear to be relevant to the instant case. Circular No. 24/2001, dated 20-4-2001 also does not appear to be relevant to this case as it has clarified that no evidence of actual duties suffered on imported or indigenous nature of inputs used. Also, Cir ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... availment of exemption Notification, therefore, no drawback is admissible against debit of duties made in a DEPB Book. 3.6 The applicant has also relied upon order of Hon ble Apex Court in ITC Ltd. v. CCE, New Delhi reported in 2004 (171) E.L.T. 433 (S.C.) the case in their favour. 4. A show cause notice under Section 129DD of the Customs Act, 1962 was issued to the respondent M/s. Tata International. In response to the show cause notice, the Respondents filed cross-objections vide their letter dated 22-7-2006, wherein, they made following main submissions that :- (i). Their claim is of All Industry Rate of Drawback under DBK Shipping bills and their exports are not under DEPB or DEPB-cum-DBK Shipping bills. (ii) As per Board s Circular No. 24/2001, dated 20-4-2001, as a matter of rule, no evidence of actual duties suffered on imported or indigenous nature of inputs used, even if the All Industry Rate has Customs position, should be insisted upon by the field formations. (iii) Their leather articles were manufactured from raw-leather and not from finished leather and hence covered under DBK Schedule in Chapters 42 and 64 without availing Cenvat credit faci ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 380/09/DBK/06 380/30/DBK/06 vide Order Nos. 484/08 and 483/08, both dated 5-12-2008 respectively in favour of department. 5.1 Being aggrieved by said orders the respondent filed Writ Petition No. 689/2009 before Hon ble Madhya Pradesh High Court at Indore Bench. Hon ble High Court vide order dated 22-11-2011 directed as under :- 5.2 The Commissioner (Appeals) while allowing the claim of the petitioner in respect of eligibility for all industry rate drawback had discussed in detail the Circular No 57/2004-Cus., dated 21-10-2004 and had also examined the other Circulars dated 20-4-2001, 21-3-2005 and 28-10-2005, but the revisional authority while passing the impugned Order No. 484/2008, dated 5-12-2008 though has mentioned these circulars but, has not examined the effect of these circulars on the claim of the petitioner. The Commissioner (Appeals) had given elaborate reasons for accepting the claim of the petitioner but the revisional authority has also not considered those reason while reversing the order of the Commissioner (Appeals). The Commissioner (Appeals) had examined the relevant para of the export import policy had also taken note of the decision of the Tribunal in ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... als, as they have utilized DEPB Scheme for payment of duty, such debit of DEPB scrip cannot be treated as duty. According original authority rejected drawback claims of the respondent. While rejecting the drawback claims, the original authority had held that in terms of Notification No. 26/2003-Cus. (N.T.), dated 1-3-2003, Notification No. 8/2005-Cus. (N.T.), dated 18-1-2005 and Notification No. 36/2005-Cus. (N.T.), dated 2-5-2005, the rates of drawback shall not be applicable to export of a commodity or product if such commodity or product is manufactured by availing of facility under DEPB Scheme as contained in para 4.3 and para 4.3.5 of Exim Policy 2002-07 and para 4.3 and para 4.3.5 of Exim Policy 2004-09. Being aggrieved by the Order-in-Original, the respondent preferred appeal before Commissioner (Appeals) vide Order-in- Appeal No. 515/2005, dated 29-12-2005 decided the case in favour of respondent. This Order-in-Appeal No. 515/2005 has been challenged by the department vide revision application No. 380/09/DBK/06. Pursuant to Order-in-Appeal No. 515/2005, original authority sanctioned drawback claim, however, no interest was paid to the respondent. Being aggrieved by order of ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... vant provisions i.e. Para 7(g) of Notification No. 36/2005-Cus. reads as follows : 7. The rates of drawback specified in the said Schedule shall not be applicable to export of a commodity or product if such commodity or product is - (a) ------------------------------------------------------------------------------------ (b) ------------------------------------------------------------------------------------ --------------------------------------------------------------------------- (g) manufactured or exported availing of the facility under the Duty Entitlement Pass Book Scheme as contained in paragraph 7.14, read with paragraph 7.17 of the Export and Import Policy 1997-2002 and manufactured or exported availing of the facility under the Duty Entitlement Pass Book Scheme as contained in paragraph 4.3 of the Export and Import Policy 2002-2007, notified under section 5 of the Foreign Trade (Development and Regulation) Act, 1992 (22 of 1992), read with paragraph 4.37 of the Hand Book of Procedures (Volume 1) issued in pursuance of the provisions of paragraph 2.4 of the said policy and manufactured or exported availing of the facility under the Duty Entitlement P ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ndustry Rate has Customs portion, should be insisted upon and in the Circular dated 21-3-2005 further the clarification given in Circular dated 20-4-2001 was reiterated. The relevant provisions of said circulars read as follows :- 9.1 Circular No. 24/2001-Cus., dated 20th April, 2001. --------- ---------- ---------- ---------- ---------- ---------- ---------- ---------- --------- ---------- ---------- ---------- ---------- ---------- ---------- ---------- 2. The issue has been examined in the Board. All Industry Rate is based on the concept of averages, wherein the drawback rate itself as well as its customs and excise portions are based on weighted averages of consumption of imported/indigenous inputs of a representative cross section of exporters and the average incidence for duties suffered on such inputs. These rates have no relation to the actual input consumption pattern and actual incidence suffered on inputs of a particular exporter or individual consignments exported by any particular exporter under AIR/DBK Claim. 3. Therefore, it is clarified that, as a matter of rule, no evidence of actual duties suffered on imported or indigenous nature of input ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... to account. In view of this, it is not open to the field officers to question as to how the rate has been determined in the case of individual export goods and to probe whether certain exempted inputs have been used in the manufacture of the same. Accordingly, it is clarified that All Industry Rate of duty drawback is to be allowed in the cases referred to above. --------- --------- ---------- ---------- ---------- ---------- ---------- ---------- --------- --------- ---------- ---------- ---------- ---------- ---------- ---------- 9.3 Government finds that Circular No. 24/2001-Cus., dated 20-4-2001 and Circular No. 19/2005-Cus., dated 21-3-2005, clarify that All Industry Rate (AIR) of duty drawback are based on the concept of averages, where the drawback rates are based on average incidence of duties suffered on inputs and has no relationship to the actual input consumption matters or actual duty incidence suffered on inputs. Government finds that in this case these circulars are not relevant since the ground for rejection of drawback claim is as explained in para 8 above. However, Government finds no merit in contention of department that since, the applicant has not suffe ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... remission scheme, which allows neutralization of deemed import duty charges on inputs used in the export product. Under the Scheme, the exporter first uses duty paid inputs in the manufacture of the export product and after exports he gets the duty credit at the notified rates. Thus, instead of refund of duty in cash after exports, a scrip in the form of DEPB is issued against the export product as duty remission. The exporter is at liberty to utilize the scrip for import of raw materials, components etc. within the credit allowed in the DEPB or he may sell it to any other exporter. 4. In a case where the exporter sells the DEPB to another exporter, he gets cash of equivalent amount to pay customs duty on the import of raw materials and components. In this situation, he would be entitled to DEPB on his subsequent exports. Further, the exporter can sell the inputs imported against DEPB to another exporter for being used in export production. In this situation also, the latter exporter will be entitled to DEPB on his exports. Therefore, to deny the DEPB benefit to an exporter who has utilised the DEPB scrip for sourcing his own inputs is not appropriate. As such, the point raised ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... the ordinary meaning of the precise words used, merely because we see, or fancy we see, an absurdity or manifest injustice from an adherence to their literal meaning (See Abley v. Dale - 11 C.B. 378). This circular has not extended the benefit of drawback in such cases and therefore it cannot be allowed. In view of the position, Government agrees with the contention of department and holds that said circular is not applicable in this case. 11. The department has relied upon Circular No. 3/99-Cus., dated 3-2-1999 where in it has been clarified that drawback is admissible only against cash payment of duties and debit of duties against DEPB scrip on import of goods is in effect availment of exemption of duty and therefore no drawback is admissible when duty is paid on inputs by debit of DEPB Scrip. Department has also contested that Circular No. 41/2005-Cus., dated 28-10-2005 provides that additional customs duty paid through debit under DEPB shall also be allowed as brand rate of drawback and no clarification has been given in respect of AIR. Since, the respondents are claiming drawback of duty at AIR this circular is not applicable to this case. The relevant para of Circular ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... n terms of Circular No. 41/2005-Cus., dated 28-10-2005, additional customs duty paid through debit under DEPB scrip shall be allowed as brand rate of drawback In terms of para 4.3.5 of Exim Policy 2004-2009. The said circular came into effect from 28-10-2005. However, perusal of Annexure-A to show cause notice dated 29-8-2005, reveals that the impugned Shipping bills pertaining to the period prior to 29-8-2005. As such, respondent reliance on applicability of this circular is not correct as the same has came into effect from 28-10-2005 i.e. after exports of goods. Moreover the circular relates the brand rate of Drawback and not for duty drawback at All Industry Rates (AIR) specified in the Drawback Schedule. 11.5 Government notes that issue of applicability of Circular No. 41/2005-Cus., dated 28-10-2005 for exports prior to 28-10-2005 has been discussed in detail by Hon ble Madras High Court in W.P. No. 24538/2006 in the case of Associated Autotex Ancillaries. Pvt. Ltd. v. Joint Secretary, M.F. reported in 2007 (211) E.L.T. 368 (Mad.). The Hon ble High Court in para (9) of its order dated 22-1-2007 observed as under : 11.6 The Circular is issued with a view to confer a benef ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... Theatres Pvt. Ltd., (2001) 250 ITR 523 and CIT v. Pooshya Exports Ltd., (2006) 262 ITR 417. Therefore, in the absence of any positive or implied indication to the effect that Circular No. 41 of 2005, dated 28-10-2005 is clarificatory and is retrospective in operation from the date of issuance of the earlier Circular No. 3 of 1999, I am not able to countenance the argument of the learned Counsel for the petitioner to treat the Circular No. 41 of 2005, dated 28-10-2005 as clarificatory and having effect of retrospectiveness in nature, which dates back to 3-2-1999. 11.7 Hon ble High Court has categorically held that the goods exported prior to 28-10-2005, are not eligible for drawback benefit, where inputs were imported by debiting DEPB scrip, as such debit was treated as payment of duty w.e.f. 28-10-2005. Since, in this case also, impugned exports took place prior to 28-10-2005 the benefit of provisions of Circular No. 41/2005, dated 28-10-2005 cannot be given effect for period prior to 28-10-2005. The said judgment of Hon ble Madras High Court is squarely applicable to this case. As such, Government finds no merit in discussing Tribunal s order in case of Polyspin Ltd. v. CCE r ..... X X X X Extracts X X X X X X X X Extracts X X X X
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