TMI Blog2006 (8) TMI 208X X X X Extracts X X X X X X X X Extracts X X X X ..... uch contingency does not arise at all nor the Tribunal had dealt with the Brand Rate Drawback, because for the raw materials or inputs in question, the Central Government has specified the amount/ rate of drawback by issuing necessary notifications under Rule 3 read with Rule 4 of the Rules. Therefore, the first question does not arise for our consideration at all and it is answered accordingly. Whether the Tribunal is correct in law in overlooking the facts that the goods have been manufactured in 100% EOU and that the exporter has mis-declared such fact in the Shipping Bill ? - We hold that question of mis-declaration in column 7 of the shipping bills by the first respondent does not arise and the duty drawback sanctioned to the first respondent, a DTA unit, as per Rule 3 read with Rule 4 of the Rules and the notification and the circulars issued therein cannot, therefore, be denied on the ground that the finished goods were manufactured in the 100% EOU. Hence, the second issue is answered in favour of the assessee. Whether the Tribunal is correct in law in ignoring the fact that the required permission from the Assistant Commissioner in charge of the 100% EOU was not ob ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... imported the materials used in the manufacture of the goods, namely Ladies 100% Cotton Woven Blouse/Shirt, the Revenue has preferred this appeal on the ground that since the said goods had been manufactured in M/s. Karle International, an 100% Export Oriented Unit (in short 100% EOU ), there was a violation to the proviso to Section 2(c) of the Notification No.67/98 dated 1-9-1998, issued in exercise of the powers conferred by Rule 3 read with Rule 4 of the Customs and Central Excise Duties Drawback Rules, 1995, (hereinafter referred to as the Rules ) framed under Section 75(2) of the Customs Act (hereinafter referred to as the Act ), raising the following substantial questions of law :- 1. Whether the findings of the Tribunal in equating the Circulars permitting Brand Rate of Drawback with the claim for All Industry Duty Drawback is correct in law. 2. Whether the Tribunal is correct in law in overlooking the facts that the goods have been manufactured in 100% EOU and that the exporter has mis-declared such fact in the Shipping Bill. 3. Whether the Tribunal is correct in law in ignoring the fact that the required permission from the Assistant Commissioner incharge of t ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... nufactured in an 100% EOU and also for having violated the provisions of sub-section (2) of Section 50 of the Customs Act, 1962. 4.4.1 On receipt of the said show cause notice dated 23-8-2001, the first respondent in its reply dated 26-9-2001 and also in the personal hearing on 29-11-2001, admitted that the raw materials imported were supplied to M/s. Karle International, an 100% EOU, for manufacture of the finished goods, using the plant and machinery of the 100% EOU; and that the finished goods were exported thereafter on behalf of the first respondent viz., M/s. L. T. Karle Co., a unit of DTA through M/s. Karle International, an 100% EOU, under four shipping bills referred to above and claimed duty drawback of Rs. 21,03,083/-, which was sanctioned by the appellant and 50% of the same was already paid to the first respondent. 4.4.2 In the reply dated 26-9-2001, the allegations that M/s. Karle International, an 100% EOU, did not obtain permission from the Customs authorities and that M/s. Karle International, the 100% EOU, misled the Revenue authorities by not mentioning in the shipping bills that the goods were manufactured by it, were denied stating that M/s. Karle Inter ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 083/- and demanded the repayment of the duty drawback already disbursed to the first respondent with interest under Section 75(A) (2) of the Customs Act. The Commissioner also imposed a penalty of Rs. 22,00,000/- on the first respondent under Section 114(iii) of the Customs Act, 1962. 4.6.1 Aggrieved by the order of the Commissioner, M/s. Karle Co. Ltd., the first respondent herein, preferred an appeal before the CESTAT. 4.6.2 The CESTAT, appreciating the contentions of the first respondent, M/s. Karle Co. Ltd., a DTA unit and also taking note of its earlier decision made in Leela Scottish Lace Ltd. v. Commissioner of Customs, Bangalore [2003(153) E.L.T.611] and Leela Scottish Lace Ltd. v. Commissioner of Customs [2003 (156) E.L.T. 548], allowed the appeal holding that the first respondent, viz., M/s. L. T. Karle Co. Ltd., a DTA unit had made out a case on merits in its favour, as there is no mis-declaration or suppression of facts in the shipping bills, nor the claim availed by it is illegitimate, in view of clause 4 of the Circular dated 14-9-1998 clarifying clause 2(c) of the Notification dated 1-9-1998 issued in exercise of powers conferred under Rule 3 r/w Rule 4 of th ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ing 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 has been allowed on any goods under this sub-section and the sale proceeds in respect of such goods are not received by or on behalf of the exporter in India within the time allowed under the Foreign Exchange Management Act, 1999 (42 of 1999), such drawback shall be deemed never to have been allowed and the Central Government may, by rules made under sub-section 92.), specify the procedure for the recovery or adjustment of the amount of such drawback; (1A) Where it appears to the Central Government 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 mat ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... hin a period of two months from the date of demand, pay in addition to the said amount of draw back, interest at the rate fixed under Section 28AA from the date of expiry of the said two months to the date of recovery of such drawbacks. 8.1 The Central Government, in exercise of powers conferred under Section 75(2) of the Customs Act, referred to above, framed the Central Excise Duties Drawback Rules, 1995 (hereinafter referred to as 'the Rules'). 8.2 Rule 3 and Rule 4 of the Rules, which are relevant to the issue, read as follows : 3. Drawback. - (1) Subject to the provisions of, (a) the Customs Act, 1962 (52 of 1962) and the rules made thereunder, (b) the Central Excies and Salt Act, 1944 (1 of 1944) and the rules made thereunder and, (c) these rules, a drawback may be allowed on the export of goods at such amount, or 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 r ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ted 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. 4. Revision of rates. - The Central Government may revise amount or rates determined under rule 3. 9.1 In exercise of powers conferred under Rule 3 read with Rule 4 of the Rules, the Central Government issued Notification No.67 of 1998 dated 1-9-1998. Clause 2 of the said notification specifies the commodities/products which are not eligible for duty drawback. Clause 2(c) of the notification No.67 of 1998 dated 1-9-1998 reads as follows :- GOVERNMENT OF INDIA MINISTRY OF FINANCE DEPARTMENT OF REVENUE New Delhi, the 1st September, 1998 NOTIFICATION No.67/98-CUSTOMS (N.T.) In exercise of the powers conferred by rule 3 read with rule 4 of the Customs and Central Excise Duties Drawback Rules, 1995 (hereinafter referred to as the said rules) and in supersession of the Notification of the Government of India, in the Ministry of Finance (Department of Revenue) NO.22/97-Customs (N.T.), dated the 30 th May, 1997, the Central Government hereby determines the rates of draw ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... he DTA units or from other EOU/EPZ/EHTP units, provided raw-material for the manufacture of such goods, whether imported or indigenous, shall first reach and be accounted for in the statutory records of the above said units. Subsequently, these raw materials may be sent to the job worker for production of the final products. Final products manufactured from such raw materials shall be brought back from job worker's premises to the unit for accounting. The units will ensure that the wastage generated during the said job work is also brought back from the job workers' premises. 4. Further to utilise the idle capacity of the EOU/EPZ units, it has also been decided that the EOU/EPZ units in textile, readymade garments, agro-processing and granite sectors may be permitted to undertake job work from the DTA units provided the finished products produced by such EOU/EPZ units will be exported directly from EOU/EPZ units itself and these goods will not be sent back to the DTA. 5. The instructions cited in para 1 above stand modified to the above extent. 9.4 When a doubt arose whether clause 2(c) of the notification dated 1-9-98 is a total bar for sanctioning the duty drawba ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... conditions: (i) The inputs which are supplied by DTA units for processing by the EOUs should have been procured by DTA units on payment of applicable duties, provided the goods which are exported are in accordance with the Circular No. 67 of 1998 dated 14-9-98 and (ii) The said DTA units will be eligible for payment of Brand Rate of Drawback against duties suffered on inputs, on submission of proof of payment of duty. 9.6 Therefore, the condition required for exporting in accordance with the Circular No.67 of 1998 dated 14-9-98 is that the finished products produced by 100% EOUs will be exported directly from the 100% EOUs and the same will not be sent back to the DTA units. V. Relevant Rules of Construction 10.1 It is a settled law that the principle that fiscal statutes should be strictly construed does not rule out the application of the principles of reasonable construction to give effect to the purpose or intention of any particular provision as apparent from the scheme of the Act, with the assistance of such external aids, as are permissible under law [Shree Sajjan Mills Ltd. v. Commissioner of Income Tax, M.P.Bhopal, (1986 TAX LAW REPORTER 48 at p.58)]. 1 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ch are exported and it is obvious that Section 75 comes into operation when the imported materials are used in respect of the goods manufactured, processed or on which any operation has been carried out in India. It further contemplates that the inputs of such goods manufactured or processed in India should have suffered duty for claiming a drawback under Section 75 of the Act. In other words, no drawback could be claimed if inputs do not suffer duty even though such goods or product is manufactured or processed in India out of the non-duty paid materials or inputs. Where goods or products manufactured or processed out of the duty paid materials or inputs, a drawback should be allowed on duties of customs chargeable under this Act on any such imported materials used in the manufacture or process of such goods or products. The duty drawback being an allowance made by the Government upon the duties due on imported inputs, when the importer, instead of selling it in the land, used the same in the manufacture or process of the goods, viz., final products and re-exported the finished goods, he is required to satisfy the conditions prescribed under the provisions of Section 75(1) 'of ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... acts that the goods have been manufactured in 100% EOU and that the exporter has mis-declared such fact in the Shipping Bill. 12.2.2 As it is contended by the learned Central Government Standing Counsel that column 7, which prescribes for the name of the manufacturer, has not been filled up by the exporter, we took the pain of searching column 7 in the shipping bills produced before us. But, there is no such column 7 at all as contended nor the learned Central Government Standing Counsel is in a position to bring to our notice column 7, which is now being complained as mis-declared by the first respondent, a DTA unit nor we could find any column in the shipping bill requiring the first respondent, a DTA unit to mention that the goods were manufactured in an 100% EOU. Unless any such column is prescribed in the shipping bills, or a statute, viz., Act, Rule, Notification or Circular contemplates so, there is no necessity for the first respondent, a DTA unit to mention that the goods were manufactured in a 100% EOU. In the absence of any such qualifying requirement requiring the first respondent, a DTA unit to mention that the goods were manufactured in a 100% EOU, it cannot be sai ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ties suffered on their inputs which are processed by EOU/EPZ units for the manufacture of goods which are exported in accordance with the Circular No. 67 of 1998. 12.2.7 The Constitution Bench of the Apex Court in Collector of Central Excise, Vadodra v. Dhiren Chemical Industries, 2002 (139) E.L.T. 3 (S.C.) = [2002] 126 STC 122, held that if there are circulars which have been issued by the Central Board of Excise and Customs which place a different interpretation upon the said phrase, that interpretation will be binding upon the revenue. Similar view was taken by the Apex Court in Collector of Central Excise, Vadodara v. Dhiren Chemical Industries, [2002 (143) E.L.T. 19]. 12.2.8 In Commissioner of Customs, Calcutta v. Indian Oil Corporation Ltd., [2004 (165) E.L.T. 257], the Apex Court held that the circulars issued by the revenue are binding primarily on basis of language of statutory provisions buttressed by need of adjudicating officers to maintain uniformity in levy of tax/duty throughout the country and not on the basis of promissory estoppel, and that when a circular remains in operation, the revenue is bound by it and cannot be allowed to plea that it is not valid nor ..... X X X X Extracts X X X X X X X X Extracts X X X X
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