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Issues:
1. Entitlement to duty drawback on exported products. 2. Disallowance of drawback based on the percentage of duty paid raw material used in manufacturing. 3. Interpretation of All-Industry Rates of Drawback fixed by the Central Government. 4. Applicability of the first proviso to Rule 3 of the Customs and Central Excise Duties Drawback Rules, 1995. Entitlement to Duty Drawback on Exported Products: The appeal was filed against an order disallowing duty drawback on exported 'Heat Resistant Latex Rubber Threads' by the Commissioner of Customs & Central Excise, Hyderabad-II Commissionerate. The appellants claimed duty drawback at rates notified in the All-Industry Rates of Drawback schedule. The Commissioner disallowed the drawback, citing that the duty paid imported raw material used in manufacturing was only 2%. The appellants contested this decision, arguing that when claiming drawback based on All-Industry Rates, it is not within the Field Authorities' purview to investigate the extent of duty paid materials used. They relied on Board Circulars to support their stance that the percentage of duty paid raw material used is irrelevant when claiming drawback based on government-fixed rates. Disallowance of Drawback Based on Raw Material Percentage: The lower authority restricted the duty drawback based on the quantity of duty paid raw material used in manufacturing the exported product. The appellants challenged this restriction, contending that the Field Officer cannot limit the drawback when it is fixed by the Central Government based on Industry Average. The Board's Circular No. 19/2005 clarified that the All-Industry Rates of drawback are determined on weighted averages of input consumption, not on individual exporters' specific input patterns. This circular emphasized that the first proviso to Rule 3 of the Drawback Rules is intended for the Ministry, not for Field Officers to alter drawback rates arbitrarily for individual exporters. Consequently, the Tribunal set aside the impugned order, stating that the Field Officers are not required to question how rates are determined or conduct further probing. Interpretation of All-Industry Rates of Drawback: The appellants argued that the All-Industry Rates of Drawback fixed by the Central Government are based on industry averages and should not be subject to scrutiny by Field Officers regarding the extent of duty paid materials used in manufacturing. The Circulars provided by the appellants clarified that the rates are determined considering the average duties paid on inputs across a representative cross-section of exporters, and Field Officers should not question the rate determination or probe into individual exporters' input usage. This interpretation led the Tribunal to conclude that the impugned order had no merit, and the appeal was allowed with consequential relief. Applicability of the First Proviso to Rule 3: The Circulars referenced in the case emphasized that the first proviso to Rule 3 of the Drawback Rules is intended for the Ministry to guide how duty drawback rates are determined in specific situations. It clarified that this provision should not be used by Field Officers to alter All-Industry Rates of duty drawback for individual exporters. The Tribunal, in line with this interpretation, set aside the impugned order, highlighting that Field Officers are not tasked with examining how rates are fixed or conducting further inquiries, thereby allowing the appeal with any consequential relief deemed appropriate. ---
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