2014 (11) TMI 1117 - HC - Customs

Duty Drawback - All Industry Rate of 1% available to petitioner - withholding of AIR drawback to Soyabean Meal (SBM) exporters - the case of petitioner is that Drawback on SBM export was towards customs portion and benefit u/R 18 or 19(2) of CER, 2002 was towards Central Excise portion therefore, there cannot be any reason to withhold Customs drawback if the manufacturers had claimed rebate of Central Excise duty or procured Central Excise duty free inputs - Circular No. 35/2010, dated 17-9-2010 clarified that both the benefits i.e., AIR drawback @ 1% and the benefit of Rule 18 or 19(2) of the Central Excise Rules, 2002 are simultaneously available - whether the Circular No. 35/2010, dated 17-9-2010 is prospective or retrospective in nature (a) when the language used in earlier Notification No. 81/2006; 68/2007 and 103/2008 and the language used in subsequent Notification No. 84/2010 is same and (b) when the circular being a benovolent circular has prospective effect or retrospective effect? Held that - As per Condition No. 7(f) of N/N. 81/2006 the rates of drawback specified in the said Schedule shall not be applicable to export of the commodity or product if such commodity or product is manufactured or exported in terms of sub-rule (2) of Rule 19 of the Central Excise Rules, 2002 - the notification denies the drawback of the entire schedule (whether Excise or Customs components), if the facility of Rule 19(2) of the Central Excise Rules, 2002 is availed. The said conditions are the prime requirement to get the commodity eligible for the drawback. In the case in hand, the Condition No. 7(f) debar the goods from the purview of the drawback if the said goods manufactured or exported availing facility of Rule 19(2) of Central Excise Rules, the drawback was not admissible to the said goods (SBM/DOC) manufactured availing facility of Rule 19(2) of Hexane and/or other materials procured duty free by them and used the same in the manufacture of DOC/SBM. The simultaneous availment of drawback as well as Rule 19(2) was introduced by the respondent No. 2 by omission of Clause 8(f) of erstwhile Notification No. 103/2008 and the introduction of new Clause 9(b) in N/N. 84/2010 which was made effective from 20-9-2010 and explained the same in Circular No. 35/2010. Since the N/N. 84/2010 was effective from 20-9-2010 and the same cannot be given retrospective effect. Notification dated 17-9-2010 is not merely clarify the position and make the issue explicit, which was implicit in the earlier notification nor the same would be applicable retrospectively. The question of giving retrospective effect to Notification dated 17-9-2010, does not arise when it is very clearly mentioned therein that the same shall come into force on the 20th day of September, 2010. Petition dismissed - decided against petitioner.

Summary

Issues Involved:
1. Whether Circular No. 35/2010-Cus., dated 17-9-2010 has retrospective or prospective effect.
2. Entitlement of the petitioner to claim duty drawback on Soyabean Meal (SBM) exports for the period prior to 17-9-2010.
3. Compliance with conditions specified in various notifications and rules.

Detailed Analysis:

1. Retrospective or Prospective Effect of Circular No. 35/2010-Cus., dated 17-9-2010:
The primary issue is whether Circular No. 35/2010-Cus., dated 17-9-2010, has retrospective effect. The petitioner argued that the circular merely clarifies the position and should apply retrospectively, as the language in earlier notifications (Nos. 81/2006, 68/2007, and 103/2008) and subsequent Notification No. 84/2010 is the same. The respondents countered that the notification explicitly states it comes into force on 20-9-2010, and thus, it cannot have retrospective effect. The court agreed with the respondents, stating that the notification's effective date is clearly mentioned, and it does not have retrospective effect. The court cited the full bench decision in Laxminarayan v. Shiv Gujar & Ors., emphasizing that retrospective operation of law is not easily deduced unless explicitly stated.

2. Entitlement to Duty Drawback on SBM Exports Prior to 17-9-2010:
The petitioner's entitlement to duty drawback on SBM exports for the period before 17-9-2010 was contested. The petitioner claimed that the notifications did not change the legal provisions regarding the availment of customs component drawback, even when benefits under Rule 18 or 19(2) of the Central Excise Rules, 2002, were availed. The respondents argued that the petitioner was not entitled to the drawback as per the conditions specified in the notifications. The court noted that the notifications explicitly denied the drawback if the benefits of Rule 19(2) were availed. The court further emphasized that exemption notifications must be strictly construed, and the burden of proof lies on the assessee to show entitlement to the exemption.

3. Compliance with Conditions in Notifications and Rules:
The compliance with conditions specified in various notifications and rules was another crucial issue. The respondents highlighted that the petitioner falsely declared at the port that the export goods were manufactured without availing the benefit of Rule 19(2), thereby fraudulently claiming the drawback. The court referred to several Supreme Court judgments, including Commissioner of Central Excise, Chandigarh-I v. Mahaan Dairies, Commissioner of Central Excise & Customs, Indore v. Parenteral Drugs (I) Ltd., and Commissioner of Central Excise, New Delhi v. Hari Chand Shri Gopal & Ors., which held that exemption notifications must be strictly complied with, and the burden of proof lies on the claimant. The court concluded that the petitioner did not comply with the mandatory conditions and was not entitled to the claimed drawback.

Conclusion:
The court dismissed the writ petition, holding that Circular No. 35/2010-Cus., dated 17-9-2010, does not have retrospective effect and the petitioner was not entitled to the duty drawback for SBM exports prior to 17-9-2010. The court emphasized the necessity of strict compliance with exemption notifications and the burden of proof on the claimant to establish entitlement.