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M.F. Rings & Bearing Races Ltd., R.N. Gupta & Co. Ltd., Uma Shankar Khandelwal & Co., Kunj Forgings Versus Commissioner of Customs & Another, Union of India & Others

2016 (5) TMI 440 - DELHI HIGH COURT

Eligibility for duty drawback - Flanges manufactured by the process of forging and exported from the country - Not availed CENVAT in relation to the inputs used for manufacturing the Flanges - Petitioners contended that Flanges manufactured by them and exported during the period 10th December, 2002 to 6th April, 2003 are covered under SS No. 73.29 under Chapter 73 of the Table of Drawback Rates 2002-03 notified by Custom Notification No. 33/2002 (NT) as amended by Notification No. 80/2002 (NT) d .....

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Rates of duty drawback. Although, it was also mentioned that the Petitioners have not provided proof of payment of duties, the said line of argument was not pressed. Thus, the only question to be addressed in respect of claims made under the Drawback Schedule 2002-03 is whether the benefit of duty drawback could be denied to the Petitioners on the ground that the data relating to Flanges had not been provided by EEPC and, therefore, was not considered by the Central Government while fixing the A .....

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ed that the Flanges exported by the Petitioners conformed to the description as specified in SS 73.29 of Drawback Schedule 2002-03 and SS 73.28 of Drawback Schedule 2003- 04 inasmuch as, (i) the Flanges were manufactured from carbon steel; (ii) they were manufactured by the process of forging; and (iii) CENVAT credit on the inputs had not been claimed. Thus, the Petitioners would clearly be entitled to duty drawback at the notified rates in respect of the Flanges exported by them. - All Indu .....

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weighed with the authority while framing that law if the provisions of the statute are clear and unequivocal. The scope of the entries in question have to be interpreted on the plain language of the entries, if the same is unambiguous, and it is not open for a Court to interpret the entries in the light of data which may or may not be collected by the Central Government in framing those entries and fixing the All Industry Rates. In the present case, it is found that the language of the entries i .....

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ed that the devices of public notice or circulars cannot be adopted for modifying the substantive provisions of a statutory notification. Therefore, a benefit granted by a statutory notification cannot be withdrawn with retrospective effect and that too by a device of a public notice. The Petitioners, here, claim to have made exports and priced their shipments on the basis of the Drawback Schedules notified by the Central Government. Thus, the benefit of duty drawback cannot be denied to them. .....

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action for filing the petition lay entirely outside the territories of Delhi. - Held that:- although, there is merit in Respondent's contention that situs of passing a legislation would not give rise to a cause of action to file a writ petition challenging its validity. However, in the present case, the Petitioner has also impugned the letter dated 8th April, 2003 which is not in the nature of a legislative instrument but is an executive direction. Hence, it is apparent that a part of the c .....

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and Mr Sudeep Singh, Advocates For the Respondents : Mr Kamal Nijhawan, Senior Standing Counsel. Mr Bhagvan Swarup Shukla, CGSC with Mr Rachit Goel, Advocate for UOI JUDGMENT Vibhu Bakhru, J 1. The controversy involved in the present petitions relates to denial of duty drawback on Flanges manufactured by the Petitioners, by the process of forging, and exported from the country. The Petitioners claim that Flanges manufactured by them and exported during the period 10th December, 2002 to 6th April .....

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st the claim as according to them, Flanges are manufactured by using low grade steel and are, therefore, not covered under SS No. 73.29 or SS No. 73.28 for the purposes of grant of duty drawback. The Respondents state that the duty drawback rates have been computed on the basis of the data provided by the Forgings Panel of the Engineering Export Promotion Council (EEPC), which did not contain any data regarding Flanges and, therefore, duty drawback at the rates fixed by the Central Government is .....

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ioners have also impugned a letter dated 8th April, 2003 issued by the Joint Secretary (Drawback), Ministry of Finance, Government of India, clarifying that Flanges are not eligible for duty drawback under SS No. 73.29 and 73.30 of the Drawback Schedule 2002- 03 and SS No. 73.28, 73.29 and 73.30 of the Drawback Schedule 2003- 04. In W.P.(C) 5277/2003, the Petitioner therein has also impugned the Corrigendum issued by way of a public notice dated 13th May, 2003, inter alia, seeking to correct and .....

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M.F. Rings & Bearing Races Ltd. (the Petitioner in W.P.(C) No.5277/2003 and 5118/2003 and hereafter referred to as MFRBRL) are noticed hereunder. 4.1 MFRBRL is, inter alia, engaged in the manufacturing of different types of Steel Forgings under the licence issued by the Department of Industrial Development, Ministry of Industry for manufacture of Forged Steel Flanges, Rings, Discs, Forged Fittings and Bearing Races, etc. MFRBRL states that it manufactures Steel Flanges by the process of Forg .....

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h January, 2003 to 31st March, 2003 in respect of which it claims to be entitled to Duty Drawback of ₹ 51,54,890/- under Drawback Schedule 2002-03. MFRBRL has made claims for the aforesaid amount but the same has not been accepted. In addition, MFRBRL had exported Flanges under Shipping Bill Nos.1258707 and 1270730 in respect of which a duty drawback amount of ₹ 7,88,956/- was sanctioned. MFRBRL has also exported Flanges under Shipping Bills dated 10th April, 2003 to 16th May, 2003 i .....

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s sanctioned earlier be not recovered along with interest. 4.4 MFRBRL was issued another Show Cause Notice dated 22nd July, 2003 referring to the Corrigendum dated 13th May, 2003 issued by the Respondents for rectifying, inter alia, SS 73.28, 73.29, 73.30 and 73.31 of Drawback Schedule 2003-04 and calling upon MFRBRL to show cause why the benefit of duty drawback in respect of Shipping Bills for the period 10th April, 2003 to 16th May, 2003 be not denied to it. 4.5 MFRBRL has filed the petition .....

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arly, Uma Shankar Khandelwal & Co. (the Petitioner in W.P.(C) 5403/2003) impugns the denial of duty drawback of ₹ 2,11,49,807/- in respect of exports made under shipping bills for the period 20th January, 2003 to 4th April, 2003. In W.P.(C) 5394/2003, R.N. Gupta and Co. Ltd. (the Petitioner therein) claims a sum of ₹ 30,38,385/- as duty drawback under SS 73.28 of the Drawback Schedule 2003-04 alongwith interest. In W.P.(C) 5692/2003, M/s Kunj Forgings (the Petitioner therein) cla .....

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etitioners were not entitled to duty drawback for export of Flanges because Flanges are manufactured by using low grade steel and the relevant data pertaining to the said product was not considered while fixing the All Industry Rates of duty drawbacks under the Drawback Schedules notified by the Central Government. The learned counsel referred to the Customs and Central Excise Duties Drawback Rules, 1995 and drew the attention of this Court to Sub-rule (2) of Rule 3 which, inter alia, postulates .....

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or Standing counsels strongly relied upon the decision of the Gujarat High Court in Micro Forge (India) Ltd. v. Union of India: 2014 (307) E.L.T. 652 (Guj.) and contended that the issues agitated by the Petitioners were covered by the said decision. 8. The learned counsel for the Respondents also supported the clarification issued by the Joint Secretary (Drawback), Ministry of Finance, by his letter dated 8th April, 2003 wherein it was clarified that the data relating to Flanges was not provided .....

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f Flanges manufactured by the process of Forging are eligible for duty drawback at All Industry Rates under SS 73.29 of the Drawback Schedule 2002-03 and/or SS 73.28 of the Drawback Schedule 2003-04, as notified under the Customs and Central Excise Duties Drawback Rules, 1995. 10. Flanges are defined as a projecting edge or rib of a metal wheel or beam used for strengthening, guiding, attaching or securing . The Petitioners state that Flanges are shaped as metal rings, which are used as sleeves .....

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anting Duty Drawback is provided under Section 75 of the Customs Act, 1962 (hereafter the Act ). Section 75 of the Act and Section 37 of the Central Excise Act, 1944 provides that where it appears to the Central Government that in respect of any goods or any class or description of goods manufactured in India and which have been entered for export, a drawback should be allowed of duties of customs chargeable on any imported material used in manufacture or processing of such goods, the Central Go .....

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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 has been made by the proper officer, a drawback should be allowed of duties of customs chargeable under this Act on any imported materials of a class or description used in the manufacture or process .....

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f goods is less than the value of the imported materials used in the manufacture or processing of such goods or carrying out any operation on such goods or class of goods, or is not more than such percentage of the value of the imported materials used in the manufacture or processing of such goods or carrying out any operation on such goods or class of goods as the Central Government may, by notification in the Official Gazette, specify in this behalf: Provided further that where any drawback ha .....

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that the quantity of a particular material imported into India is more than the total quantity of like material that has been used in the goods manufactured, processed or on which any operation has been carried out in India and exported outside India, then, the Central Government may, by notification in the Official Gazette, declare that so much of the material as is contained in the goods exported shall, for the purpose of sub-section (1), be deemed to be imported material. (2) The Central Gove .....

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rying out any operation on export goods of that class or description either by manufacturers generally or by persons processing or carrying on any operation generally or by any particular manufacturer or particular person carrying on any process or other operation, and interest if any payable thereon; (aa) for specifying the goods in respect of which no drawback shall be allowed; (ab) for specifying the procedure for recovery or adjustment of the amount of any drawback which had been allowed und .....

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spect the processes of manufacture, process or any other operation carried out and to verify by actual check or otherwise the statements made in support of the claim for drawback. (d) for the manner and the time within which the claim for payment of drawback may be filed; 13. In exercise of the powers conferred under Section 75(2) of the Act and Section 37 of the Central Excise Act, 1944, the Central Government had framed the Customs and Central Excise Duties Drawback Rules, 1971 which were subs .....

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: (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 imported materials or excisable materials used for production or manufacture in India of a particular class of goods. (c) the average amount of duties paid on imported material .....

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rted materials or excisable materials used for containing or packing the export goods; (f) any other information which the Central Government may consider relevant or useful for the purpose. 15. In exercise of the powers conferred under Rules 3 and 4 of the Rules, the Central Government notified the Drawback Schedule 2002- 2003 vide Notification No. 33/2002 (NT). Chapter 73 of the said Schedule concerns articles of iron and steel. SS 73.29 of the Drawback Schedule 2002-03 as effective from 1st J .....

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in the manufacture of these goods. Rs.19.00 (Rupees nineteen only) per kg. of steel content 12.00 7.00 16. The above entry, SS 73.29, was subsequently substituted by Notification No. 80/2002 (N.T.) w.e.f. 10th December, 2002, which reads as under: Serial/ Sub- Serial No. Description of Goods Rate of Drawback Allocation Customs Excise 73.29 Non-alloy/Carbon Steel Forgings (rough) / unmachined/semifinished / machined / identifiable ready to use machined parts / components manufactured through forg .....

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fication dated 1st April, 2003 reads as under: Serial/ Sub- Serial No. Description of Goods Rate of Drawback Allocation Customs Excise 73.28 Non-alloy/ Carbon Steel Forgings (rough)/ unmachined/ semifinished/ machined/ identifiable ready-to-use machined parts/ components, manufactured through forging process, when CENVAT facility has not been availed. Rs.17.00 (Rs. seventeen only) per kg. of steel content. 10.70 6.3 0 73.29 Non-alloy/ Carbon Steel Forgings (rough)/ unmachined/ semifinished/ mach .....

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17.40 9.40 73.31 Alloy Steel Forgings (rough) / unmachined/semi-finished/ machined/ identifiable readyto- use machined parts/components, manufactured through forging process, when CENVAT facility has been availed. Rs.17.40 (Rs. seventeen and paise forty only) per kg. of steel content. All Customs 18. Therefore, the Respondents then issued a corrigendum by way of a public notice on 13th May, 2003, inter alia, rectifying entries SS 73.28, 73.29, 73.30 and 73.31 of the Drawback Schedule 2003-04. Th .....

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hapter 73, in column 3, against Serial/Sub-serial No.73.30, after the word, ".... manufactured ...", the words, "...out of duty paid imported steel...", shall be inserted. 13. At page 65, in Chapter 73, in column 3, against Serial/Sub-serial No.73.31, after the word, ".... manufactured ...", the words, "...out of duty paid imported steel...", shall be inserted. 19. The Central Government issued a Notification dated 25th June, 2003 (being Notification No.42 .....

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laimed duty drawback at the rates specified in respect of SS 73.29 of Drawback Schedule 2002-03 for exports under shipping bills for the period prior to 7th April, 2003, the date from which the notification dated 1st April, 2003 came into effect. R.N. Gupta & Co. Ltd. (the Petitioner in W.P.(C) 5394/2003) and MFRBRL have also claimed benefit of duty drawback under entry SS 73.28 of the Drawback Schedule 2003-04 for export of Flanges made after 6th April, 2003. 21. It is clear on a plain read .....

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also mentioned that the Petitioners have not provided proof of payment of duties, the said line of argument was not pressed. Thus, the only question to be addressed in respect of claims made under the Drawback Schedule 2002-03 is whether the benefit of duty drawback could be denied to the Petitioners on the ground that the data relating to Flanges had not been provided by EEPC and, therefore, was not considered by the Central Government while fixing the All Industry Rates. 23. Insofar as the exp .....

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icates that the rates of drawback are to be fixed by the Central Government on the basis of averages in respect of industry as a whole. Sub-rule (2) of Rule 3 of the Rules expressly provides that the Central Government shall have regard to the average quantity or value of the materials from which the goods in question are ordinarily produced or manufactured in India; the average quantity of value of imported material or excisable material used for production or manufacture of goods and the avera .....

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whole. Thus, there is little scope for calling upon a particular manufacturer to provide proof of the duties actually paid on the materials used by him for manufacture or production of the eligible product, for the purposes of granting duty drawback. 25. Circular No. 23/2001-CUS dated 18th April, 2001 issued by the Central Board of Excise and Customs, New Delhi also clarifies the above position and puts it beyond any pail of doubt. The relevant extract of the said Circular is reproduced below:- .....

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duties and evidence of import of inputs against individual consignments exported by individual exporters under claim for Drawback at All Industry Rate and this is creating undue delay in disbursement of drawback and harassment to genuine exporters. 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 i .....

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ortion, should be insisted upon by the field formations along with declaration filed by exporters under Rule 12(l)(a)(ii) of the Customs & Central Excise Duties Drawback Rules, 1995. 26. In view of the above, an exporter is only required to satisfy that the exported product falls within the description of the goods as notified by the Central Government in order to claim duty drawbacks at the specified All Industry Rates. It cannot be disputed that the Flanges exported by the Petitioners conf .....

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ied to the Petitioners on the basis of the clarification issued by the Joint Secretary by way of a letter dated 8th April, 2003. The said letter dated 8th April, 2003 was addressed to all the Commissioners of Customs and Central Excise for information and necessary action and is reproduced below for ready reference:- Sub: Duty Drawback Rates for Non-Alloy Steel and Alloy Steel Forgings ...................... Please refer to the discussions you had with the undersigned and Shri Avinash Pushkarna, .....

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ri A. K. Raha, Commissioner of Customs, ICD-TKD, Delhi in his letter No VIII/ICD/TKD/20/DBK/22/03 dated 20th March 2003 had provided details of certain shipment bill relating to drawback claims under these sub-serial numbers, which appear to be disproportionately high. According to you, all these shipments were for 'FLANGES'. We have gleaned through our data and find that data provided by Forgings Panel of Engineering Export Promotion Council did not contain data regarding "FLANGES& .....

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ping in view the revenue interest and in consonance with the true mandate of Customs & Central Excise Duties Drawback Rules 1995, it is clarified that 'FLANGES' were not and are not eligible for drawback under these entries. In order to further gauge the extent of any other misuse of these entries I have already sent a detailed FAX to your Commissioner and other Commissioners soliciting details of such shipments so that further corrective action can be taken by the Ministry by the Mi .....

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notified by the Central Government are in pursuance of the powers of delegated legislation conferred under Section 75 of the Act read with the Rules. The All Industry Rates of duty drawbacks as fixed by the Central Government are statutory. Thus, we find it difficult to accept that such statutory notifications could be whittled down or amended by an executive circular. 30. We have no reason to doubt the assertion that the data relating to Flanges had not been forwarded by EEPC and, therefore, w .....

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view, the only question to be answered would be whether the product, Flanges, conforms to the conditions of SS 73.29 of Drawback Schedule 2002-03 and 73.28 of Drawback Schedule 2003-04. It is not open for the Court or the executive to look beyond the plain language of the statute if it is clear and unambiguous. 31. The above principle was pithily put by Lord Cairns in Partington v. Attorney General: (1869) LR 4 HL 100 in the following words:- As I understand the principle of all fiscal interpre .....

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(S.C.) a Constitution Bench of the Supreme Court considered the question whether excise duty exemption was available in respect of cotton fabrics which were produced on powerlooms owned by a co-operative society. Such exemption was claimed in respect of two notifications issued by the Central Government. The appellant therein claimed that in terms of the plain language of the notifications, it was entitled to exemption from payment of excise duty on the cotton fabrics. The appellant contended t .....

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rein that the object of granting exemption was to encourage the formation of co-operative societies which not only produced cotton fabrics but which consisted of members who not only owned but had actually operated not more than four powerlooms during the three years immediately preceding their joining the society. It was emphasized that the intention of the Government always was that exemption be available only in respect of goods produced by the society on its own behalf. The Court did not acc .....

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he tax-payer is within the plain terms of the exemption it cannot be denied its benefit by calling in aid any supposed intention of the exempting authority. 33. The Supreme Court also referred to the following observations made by Lord Watson in Salomon v. Salomon and Co.: 1897 AC 22: Intention of the Legislature is a common but very slippery phrase, which, popularly understood may signify anything from intention embodied in positive enactment to speculative opinion as to what the Legislature pr .....

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no room in the language of relevant entries to impose additional conditions, other than those expressly stated. Equally, no exclusion can be read in which is not expressly indicated or ascertainable from the plain language of the entries in question. 35. We are, respectively, unable to subscribe to the view accepted by the Gujarat High Court in Micro Forge (India) Ltd. (supra). In our view, it is not open for a Court, while interpreting any statute, to examine the material which weighed with th .....

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ocal and, thus, there is no room to attempt to discover the intention of the Central Government by taking recourse to any other external aid. 36. In view of the aforesaid, the clarification dated 8th April, 2003 has no statutory force. The express language of the Drawback Schedules as notified by Central Government in exercise of statutory powers cannot be diluted or whittled down by the letter dated 8th April, 2003 and, accordingly, the same is liable to be set aside. 37. We are also inclined t .....

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ided on 1st February, 2016, following the earlier decisions in Sandur Micro Circuits Ltd. v. Commissioner of Central Excise: 2008 (8) TMI 3-SC, Modi Rubber Ltd. v. Union of India: 1978 (2) ELT (J127)(Del.) and Pioneer India Electronics (P) Ltd. v. Union of India: 2014 (301) ELT 59 (Del.), it was held that the statutory notifications cannot be amended by the device of circulars. More importantly, a benefit granted by a statutory notification cannot be withdrawn with retrospective effect and that .....

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Gripe Water with effect from June 1st, 1983 by way of public notice dated 11th February, 1984. The Respondents had also issued show cause notices pursuant to the public notice dated 11th February, 1984. The Court accepted the challenge to the show cause notices and held that it is not open for the authority issuing public notice to withdraw the benefit with retrospective effect and consequently the issuance of the show cause notice was without jurisdiction . 40. Before concluding, it is necessar .....

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