TMI Blog1991 (2) TMI 113X X X X Extracts X X X X X X X X Extracts X X X X ..... he rule and this conclusion is not, in fact, challenged by the learned counsel for the appellants. The Government was, therefore, right in rejecting the appellants' request made under Section 7 of the Drawback Rules. Thus agreeing with the High Court that the order of the Central Government rejecting the assessees' application was well founded and cannot be interfered with. Appeal dismissed. - 692 & 693/81 - - - Dated:- 11-2-1991 - S. Ranganathan, N.M. Kasliwal and S.C. Agrawal, JJ. [Order per : Ranganathan, J.]. - These two appeals involve a common question and can be disposed of by a common judgment. The question is whether the appellant companies (hereinafter referred to as the 'assessees') are entitled to full "draw back" of the customs duty which they had paid on the import of de-methyl-terephthalate (shortly referred to as `DMT') for manufacture of polyester staple fibre yarn. The assessees converted the DMT into polyester staple fibre in their factory at Thane and then sent it to Bhilwara in Rajasthan where the Rajasthan Spinning and Weaving Mills blended it with indigenous viscose staple fibre to spin out certain varieties of blended yarn. It is common ground that ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... al Government. xxx xxx xxx In determining the amount or rate of drawback under this rule the Central Government shall have regard to : 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, 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, the average amount of duties paid on imported materials or excisable materials used in the manufacture of semis, components and intermediate products which are used in the manufacture of goods, the average amount of duties paid on materials wasted in the process of manufacture and catalytic agents : Provided that if any such waste or catalytic agent is used in any process of manufacture or is sold, the average amount of duties on the waste or catalytic agent so used or sold shall also be deducted, the average amount of duties paid on imported materials or excisable materials used for containing or packing the exported goods, the average amount of duties of excise paid on the ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... : "Synthetic and regenerated fibre, textile yarn, thread, twines, cords and ropes." It is common ground that the goods exported by the assessees fall under Item 25 above. There is also no controversy that the DMT imported by the assessees was used for the manufacture of the above commodity and that, on the import of the DMT, the assessees have paid customs duty. The rates of drawback available in respect of various goods were notified by the Central Government in due course. Against Serial No. 25, the notification set out the rates of drawback as follows : Serial No. Sub-Sl. No. Description of goods Rate of Drawback 25 SYNTHETIC AND RE-GENERATED FIBRES AND TEXTILE YARN/ THREADS, TWINES, CORDS AND ROPES 2501 Synthetic and regenerated fibre and textile yarn, thread, twines, cords and ropes not elsewhere specified. Brand rate to be fixed on an application from the individual manufacturer/exporter. 2502 Yarn of above 21 BWS Counts or above 14 n.f. counts, spun (a) wholly out of either viscose rayon fibre or acetate fibre polyster fibre, polyarnide fibre or acrylic fibre or w ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... nment by a communication dated 12-3-1978. This communication was in the following terms : "Under Rule 3 of the Customs and Central Excise Duties Drawback Rules, 1971, all industry rates of drawback on polyester viscose blended yarn have been determined and announced under serial No. 2502 of the Drawback Schedule. The said rates have been determined at the material time after taking into consideration : duty incidence of raw materials used in the manufacture of (a) viscose fibre, plus the Central Excise duty on viscose fibre and the Central Excise duty on polyester fibre in respect of (b) polyester yarn. However, no raw material duty for manufacture of polyester yarn was taken into account, as the same (DMT) is available indigenously and is exempted from Central Excise Duty. For the rates determined effective from 18-8-1977 however the duty incidence on DMT has also been taken into consideration on the basis of weighted average of imported and indigenous material." The assessees, dissatisfied with this decision of the Central Government, preferred a writ petition in the Delhi High Court, which was dismissed by the High Court on 19-5-1980. Hence the present appeal ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ermit the conversion of the DMT into polyester fibre under Customs bond for reason which are not at present relevant and which are not being challenged in these proceedings. The assessee's request for the manufacture of polyester fibre under Customs bond was declined by the Customs authorities on 2-4-1976. Perhaps anticipating this difficulty, the Association of Polyester Staple Fibre Manufacturers at Bombay made an application to the Central Government on 26-3-1976 praying for exemption from Customs duty on DMT required for the manufacture of polyester staple fibre. This letter points out : "Members of this Association manufacture polyester staple fibre. One of our members has received an advance licence for the import of DMT, a photostat copy of which we attach herewith. This DMT is to be used for manufacture in polyester fibre and the polyester fibre then converted into yarn to be supplied against export orders. Our members wish to explore possibility of larger export business in this manner. Indigenous supplies of both DMT and glycol are insufficient to meet the domestic market requirements and export business can only be done by import of the two materials. Fulfilling expo ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... they had sought for permission to convert DMT into polyester under Customs bond. If that had been done, there would have been no necessity to pay customs duty at all. Unfortunately, because the department lacked facilities to supervise such an operation the attempt of the assessees was only partially successful in that they were able to get only the production of the blended fibre done under Central Excise supervision. The initial stage of conversion from DMT to polyester fibre could not be done under Customs bond. It is pointed out that the Government of India had exempted DMT from Customs duty only on the basis of the representations made by the assessees and it is urged that the refusal to grant drawback of customs duty to the assessees is wholly unjustified. The object of S. 75 of the Customs Act read with S. 37 of the Central Excise Act is obviously to provide that in cases where certain goods are imported for complete utilisation in the manufacture of goods which are exported, the importer should be able to obtain relief in respect of customs and excise duties. In the present case there is no controversy that the DMT imported by the assessee was utilised for the manufacture ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... utory intendment, it would have been simple to provide that in all cases where imported raw materials are fully used in the manufacture of goods which are exported, the assessee would be entitled to a drawback of the customs or excise duties paid by him for the import or on the manufacture. On the other hand, S. 75(2) requires the amount of drawback to be determined on a consideration of all the circumstances prevalent in a particular trade and the fact situation relevant in respect of each of various classes of goods imported and manufactured. The need for providing an elaborate process of determination as envisaged in Rule 3 is this. There may be different manufacturers of a particular manufactured item. Some of them may be using indigenous material and some may be importing some of the raw material. Similarly, in the process of manufacture also, there may be difference between manufacturer and manufacturer. That is why the drawback rules provide for a determination of the drawback after taking into account the "average" amount in respect of each of the various items specified in Rule 3 in relation to each type of goods listed in Schedule II. The notification issued also determin ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... of drawback prescribed under Item 2502 are equal to the rates of excise duty payable on the manufacture of the various items referred to therein, the nature of exemption granted is one of relief under both enactments. It is immaterial whether this quantum of relief benefits the assessee in respect of one or other or both of the levies which he has to discharge. The attempt to identify and correlate the rebate granted to the central excise duty paid does not therefore appear to be correct in principle. 11.But, th is ground apart, we think there is force in the point made by learned counsel for the Union of India and accepted by the High Court that at the time when these drawback rates were fixed, the Government of India took into account both the import duty as well as the excise duties which would be payable on the manufacture of the goods the export of which was intended to be encouraged. After examining the condition in the trade, it was found that DMT was easily available in India at that time and that, therefore, it would not be necessary to grant any relief in respect of drawback of customs duty on the imported material because that would only result in assessees atte ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... granting a drawback of customs duty. In these circumstances, the customs duty was rightly into taken not account in fixing the rate of drawback. The letter of the Government dated 9-9-1976 is only an answer to the assessees' prayer that its problem may be solved by granting an exemption for DMT from customs duty and refers only to the position after the notification of exemption. It is not a reply to the assessees' representation in respect of the past which was filed only much later in 1977. The correspondence in the case is, therefore, of no help to the assessees. It may also be pointed out that the assessees appear to have imported DMT not because it was not locally available but only because it was able to get it free of cost from the ICI which was a benefit which other manufacturers, if any, could not have enjoyed. We are, therefore, of opinion that High Court was right in concluding that the rate of drawback in respect of the goods in question was fixed after taking into consideration the aspect of customs duty payable in respect of DMT and that a conscious decision was taken that no relief in this respect should be granted as DMT was available in the country itself. It canno ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... bsequent policy in the above rules. We think it is a fit case in which the Central Government could consider whether, on equitable grounds, the assessee can be given relief in respect of the customs duty on DMT paid by it. In this context, it is worthwhile noting that the assessee saved foreign exchange for the country by importing DMT free of cost. The entire manufactured product has also been exported and earned foreign exchange. The appellants also apparently gave impetus to other manufacturers for the export of blended fibre on large scale. If only the appellants had imported the DMT a few months later, they would have been entitled to exemption from customs duty and would not have suffered the present handicap. They also did obtain the permission of the Government to convert DMT into polyester fibre under customs bond but this could not be implemented for reasons beyond their control. Having regard to all these circumstances, it would seem only just and fair that the assessees should not be denied a benefit of which all other persons have since availed of. We, therefore, think that this is a fit case in which the Government should consider, in case the assessees make an applic ..... 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