2016 (2) TMI 956 - HC - Customs

Whether the respondent writ petitioner was eligible to duty drawback on furnace oil which was utilised in the process of manufacture of its product? - interpretation of statute - the Ministry had issued a circular on 2-5-2005 clarifying the position relating to the duty drawback of HSD/furnace oil. It is from 5-5-2005 that the All Industry Rates of Duty Drawback came into force - Held that - the picking up of 5-5-2005 as a relevant date for giving the benefit of duty drawback for furnace oil to the manufacturer cannot be treated as an arbitrary fixation of a cut off rate. The inputs consumed in production are inputs physically incorporated, energy, fuels and oil used in the production process and they have to be treated as consumed in the course of their use to obtain the exported product. The fact of the matter remains that the Government had a policy in force which was contrary to what is noted herein above. Nobody had challenged that policy that had run its way through. It was thereafter that this aspect of the matter was examined by the committee constituted for formulation of All Industry Rates of Duty Drawback and the said committee has then observed that this is an outmoded approach towards understanding the scope of manufacturing process. That being so, the Government had taken up conscious policy decision and had issued the circular dated 2-5-2005 leading to Ext.P11 clarification whereby it expressed a policy contrary to the then prevailing policy and this is to the effect that HSD/furnace oil shall be eligible for duty drawback. Obviously therefore, the benefit of such provision in Ext.P11 would operate only from 5-5-2005. It cannot relate to any period before that. Similarly, no applications filed and pending for consideration before 5-5-2005 could have been ordered to be considered - appeal allowed.

Summary

Issues:
Interpretation of Ext.P11 regarding duty drawback on furnace oil utilized in manufacturing process.

Analysis:
The main issue in this case revolved around the interpretation of Ext.P11, a document issued by the Ministry of Defence, Government of India, regarding duty drawback on furnace oil used in the manufacturing process. The learned Single Judge had held that Ext.P11 was clarificatory in nature and should be applicable to pending applications for duty drawback related to furnace oil. The respondent argued that Ext.P11 should affect earlier claims for duty drawback, while the Senior Standing Counsel for C.B.E. & C. contended that it should only apply from 5-5-2005, the date when All Industry Rates of Duty Drawback came into force.

The Court noted that Ext.P11 clarified that duty drawback should be factored in for exports made from 5-5-2005 onwards, based on inputs consumed in production, including energy, fuels, and oil. The Ministry's circular on 2-5-2005 and the implementation of All Industry Rates of Duty Drawback from 5-5-2005 supported the selection of this date as relevant. The Court emphasized that the policy change reflected in Ext.P11 was a conscious decision by the Government, contrary to the previous policy, and should only apply from 5-5-2005 onwards.

Ultimately, the Court found that Ext.P11's provisions should only operate from 5-5-2005 and not for any period before that. Therefore, applications filed and pending before 5-5-2005 could not be considered under Ext.P11. Consequently, the Court allowed the writ appeal, set aside the impugned judgment, and dismissed the writ petition, without imposing any costs.

In conclusion, the judgment clarified the application of Ext.P11 regarding duty drawback on furnace oil, emphasizing that the policy change should only be effective from 5-5-2005 onwards, based on the inputs consumed in the production process.