TaxTMI 
TaxTMI 
1980 (5) TMI 45
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.... yarn made from a blend of polyester staple fibre. DMT is subject to payment of Customs duty. The petitioner at one time were able to persuade the Joint Chief Controller of Imports to permit it to import the DMT and carry out manufacturing operation in customs bond and export the yarn manufactured as aforesaid. The apparent advantage of being permitted to manufacture under customs bond is that no customs duty would have been payable on DMT imported by it. The Collector of Customs however, did not agree with this procedure and as he was the appropriate authority the petitioner imported the DMT and paid the customs duty under the Customs Act. The petitioner however, was able to persuade the Ministry of Commerce that instead of the stipulation of manufacturing under customs bond the stipulation of manufacture under supervision of Central Excise provisions be allowed. This had the result that the petitioner was not to pay any excise duty on polyester fibre which was otherwise payable. As there was no exemption from the payment of duty of customs the petitioners had to and did pay the customs duty on the import of DMT. It may be noted that the Central Government in exercise of its power....
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....may provide - ........ ……. …….. ……… …. ........ ……. …….. ……… ........ ……. …….. ……… ........ ……. …….. ……… Similarly, Section 37 of the Central Exciss and Salt Act provides for framing of the rules. In case of goods which have undergone a process and are used as ingredients in the manufacture of goods to be exported, drawback of customs duty is allowed on the imported material under 1971 Rules. 5. The petitioner claims that his case is covered by the 1971 Rules. The respondent contests this claim. That is the whole dispute in the present writ petition. Rule 3 of 1971 Rules provides for a drawback being allowed on the export of goods specified in the Schedule at such amount or at such rates which shall be determined by the Central Government. In the Schedule various goods are mentioned in respect of which drawback is allowable on export. Serial No. 25 is synthetic and regenerated fibre, textile yarn, thread, twines, cords and ropes. The rates of drawback indicated under each serial number are issued in the Official Gazette by a public notice. Under Serial No. 25 of the relevant entry with which we are concerned in the prese....
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.... of duty of customs it was the intention of the Central Government that no duty of customs should be payable on imported DMT and therefore, a brand rate had to be fixed for the petitioner's case, as it was a special one, obviously suggesting that some kind of concession or special rate or drawback on duty of customs paid on DMT should be given. We cannot agree. There is a fallacy in the argument. Sub-serial 25.01 can only be invoked, if it is a yarn not elsewhere specified. But admittedly the petitioner's yarn is of the description mentioned in 25.02. Hence, it cannot seek to have a special brand rate fixed for it, under sub-serial No. 25.01. 6. Mr. Habbu's argument for invoking sub-serial No. 25.01 seems to be that as in fixing rate of drawback under 25.02 duty of customs on DMT was not included, the petitioner's case would fall under sub-serial No. 25.01. But that is not the language of sub-serial No. 25.01 - it is only attracted if the description of goods of the petitioner was `Yarn' not elsewhere specified. Once it is conceded, that petitioner is also manufacturing yarn of the same description as in sub-serial No. 25.02, the mere fact that DMT used is imported rather than loc....
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....etermining the rate of drawback the Central Government took into account the factors mentioned in sub-rule (2) of Rule 3 and after taking into consideration - (a) duty incidence of raw material used in the manufacture of viscose fibre + the Central Excise duty on the viscose fibre and (b) the Central Excise duty on polyester fibre in respect of polyester yarn, the said rate was fixed. However, no raw material duty for manufacture of polyester yarn was taken into account as the same DMT was available indigenously and was exempted from Central Excise duty. It is to this statement that petitioners Counsel seriously took objection. Mr. Habbu's complaint was that admittedly no consideration was given to the fact that importer of DMT had to pay duty of customs and therefore in fixing the rate of drawback the considerations that are necessarily to be taken into account under sub-rule (2) of Rule 3 have not been violated. The argument in fact bordered to challenge the vires of the rate of drawback fixed in sub-serial No. 25.02 though Mr. Habbu having raised the argument stepped back from challenging the vires of rates and only urged that because the rate had not been fixed by taking into a....
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....ial case and it be given an enhanced rate of drawback. We cannot agree, the requirement of sub-rule (2) of Rule 3 is only to have regard to various situations mentioned therein. It cannot mean a compulsion to give drawback on import of DMT, when this raw material is indigenously available in plenty. 8. It should be emphasised that sub-rule (2) of Rule 3 requires that in determining the amount of rate of drawback the Central Government shall have regard to the various eventualities mentioned therein. All that it means is that these various considerations will be borne in mind when fixing the rate of drawback. This does not mean that under every sub-head a rate of drawback has to be provided for. Thus while the Central Government notices that DMT is available in plenty locally and does not provide for the drawback on the average amount of duty paid on imported raw materials the rate fixed could not be faulted on the ground that no rate of drawback on imported materials has been fixed. The reason is that having noticed that the raw material was available indigenously it would be acting against the interest of national economy nevertheless have permitted a drawback on imported materia....
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....siness interests in view. But then the business interests of the company cannot permit it to insist that the Central Government should allow it a drawback on the imported raw material when it could have got the same material inside the country without any worry. There is no unfairness involved because like other manufacturers buying locally, it was open to the petitioner company to do so and thus avoid paying duty of customs on imported DMT. 9. The petitioner thus cannot find fault with the fixation of the rate on the ground that in his case a separate rate of drawback should have been fixed for polyester fibre content as against that fixed for all industry. This objection further becomes of no consequence when the petitioner's right to invoke Rule 7 of 1971 Rules is not rejected at the threshold. The said rule provides that where the manufacturer or exporter finds that the rate of drawback determined under Rule 3 is less than three-fourths of the duties paid on the materials or components used in the production or manufacture of the said goods, he may apply to the Central Government for fixation of appropriate rate of drawback. This rule in fact, therefore, permits the petitioner....
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....ss than three-fourth of duties paid by it. We were told by Mr. Chandrashekharan that according to the department the duty of customs paid on DMT would work out to be about Rs. 7/- per Kg. Thus the petitioner could at the most claim that he had paid duty on Rs. 43.15+7 = Rs. 50.15 per Kg. but as there is a drawback of Rs. 43.15 per Kg. it cannot claim that it has paid duties more than three-fourth of rate of drawback and therefore Rule 7 would not benefit the petitioner. Mr. Chandrashekharan emphasises and we agree with it that it is not as if the respondent had rejected the case under Rule 7 on account of any technical ineligibility. The respondent even went further and showed its fairness by stating that even now if the petitioner could being its case on facts within Rule 7 by pointing that the total duties paid by it including that of DMT and the notional on polyester fibre content works out to more than three-fourth of the rate of drawback of Rs. 43.15 per Kg. the department will certainly consider the matter on merits. In that view we cannot find that the respondent arbitrarily refused to consider the case of the petitioner under Rule 7, because if in fact the petitioner's case....
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....pply to the petitioner in India DMT. The polyester staple fibre was to be manufactured by conversion at the petitioner's factory at Thana and sent to Rajasthan Spinning and Weaving Mills, Bhilwara for being blended with viscose and from the blend, yarn was to be spun at the aforesaid mills and exported. Viscose fibre was to be indigenous. Blended yarn was to be exported. The Joint Chief Controller of Imports, Bombay issued a Customs Clearance Permit dated 2nd June, 1975 to the petitioners to import the DMT, carry out the manufacturing operations in Customs bond, and export the yarn manufactured as aforesaid. Since the manufacture was to be under Customs bond, no Customs duty was payable on the DMT supplied by ICI (Singapore). The petitioners received the imported DMT towards the end of 1975 and kept it in the Customs Warehouse without payment of duty. When the petitioners approached the Collector of Customs, Bombay early in 1976 to carry out the manufacture in Bond as stipulated in the Customs Clearance Permit, the permission was refused. The petitioners then approached the Ministry of Commerce to get this Customs Clearance Permit so amended that instead of the stipulation of manuf....
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....cts one set of rules has been framed and are called Customs Central Excise Duties Drawback Rules, 1971. Relevant rules are 3, 4, 6(1)(a) and 7 which read :- "3. Drawback - (1) Subject to the provisions of - (a) the Customs Act, 1962 (52 of 1962) and the rules made thereunder, (b) the Central Excises and Salt Act, 1944 (1 of 1944) and rules made thereunder, and (c) these rules, a drawback may be allowed on the export of goods specified in the Schedule at such amount of at such rates, as may be determined by the Central Government : Provided that where any goods are produced or manufactured from imported materials or excisable materials, on some of which only duty chargeable thereon has been paid and not on the rest, or only a part of the duty chargeable has been paid, or the duty paid has been rebated or refunded in whole or in part or given as credit under any of the provisions of the Customs Act, 1962 (52 of 1962), and the rules made thereunder or of the Central Excises and Salt Act, 1944 (1 of 1944) and the rules made thereunder, the drawback admissible on the said goods shall be reduced taking into account the lesser duty paid or the rebate, refund or credit obtained : Pr....
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.... duties paid on such materials or components. 7. Cases where amount or rate of draw back determined is loss. - (1) 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 for that class of goods is less than three-fourths of the duties paid on the materials or components used in the production or manufacture of the said goods, he may make an application in writing to the Central Government for fixation of appropriate amount or rate of drawback stating all relevant facts including the proportion in which the materials or components are used in the production or manufacture of goods and the duties paid on such materials or components. (2) On receipt of the application referred to in sub-rule (1) the Central Government may, after making or causing to be made such enquiry as it deems fit, allow payment of drawback to such exporter at such amount or at such rate as may be determined to be appropriate if the amount of rate of drawback determined under Rule 3 or, as the case may be, revised under 4, is in fact less than three-fourths of such amount or rate determined under....
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.... Provided that : (i) the drawback at the above rates on account of fibre content and wool content may be admissible only if the manufacturer/exporter at the time of the shipment declares, and if necessary produces proof to the satisfaction of the Collector that the synthetic fibres mentioned at (a) to (d) above contained in the export goods are duty paid virgin fibres (and not the fibres obtained from fibre wastes, yarn waste or fabric waste by garnetting or by any other process); and the wool mentioned at (c) above is only imported duty paid wool; (ii) no rebate of the duty paid on fibres has been obtained under the Central Excise Rules, 1944; (iii) the drawback at the above rates on fibre content may not be allowed in respect of those fibres for which the declaration as aforesaid has not been made and proof as aforesaid has not been produced; (b) All wool worsted hand knitting yarn of 21 BWs or less counts. ........ ......... ........... (c) All wool worsted yarn (excluding all wool worsted hand knitting yarn) of 21 BWs or less coun....