2010 (7) TMI 714 - CGOVT - Central Excise

Exemption - Under Rule 19(2) read with Notification No. 43/2001-C.E. (N.T.) - Drawback claim an account of Exports goods - Applicant procured the input/packing material MS Drums and Multiwall papers without payment of duty under Rule 19(2) of Central Excise Rules, 2002 and exported the manufactured goods Skimmed/Full Cream Milk Powder & Butter Oil etc - It is quite evident that conditions of the said rule is not satisfied - Therefore All Industry rate or Duty drawback, even the customs component, cannot be availed of when the inputs used in the manufacturing the export goods were procured either duty free under Rule 19(2) of the Central Excise Rules, 2002 - Hence, the applicant by way of procuring duty free inputs under Rule 19(2) of Central Excise Rules, 2002 has contravened the clause (ii) of the second proviso to Rule 3(1) of the Central Excise Drawback Rules, 1995 also conditions No. 7(f) of Notification No. 68/2007-Cus. (N.T.) and condition No. 8(F) of Notification No. 103/2008-Cus. (N.T.) and therefore no drawback is admissible - Decided against the assessee..

Issues Involved:
1. Non-compliance with Notification No. 42/2001 and the use of Form ARE-2.
2. Double benefit of duty drawback and procurement of input material without payment of duty.
3. Legal challenge to the assessment of the Shipping Bill.
4. Applicability of Rule 3 of the Customs, Central Excise Duties, and Service Tax Drawback Rules, 1995.
5. Recovery of duty drawback without challenging the initial assessment.
6. Compliance with conditions of Notification No. 68/2007-Cus. (N.T.) and Notification No. 103/2008-Cus. (N.T.).

Detailed Analysis:

1. Non-compliance with Notification No. 42/2001 and the use of Form ARE-2:
The applicant did not clear goods in Form ARE-2 and did not follow the procedure under Notification No. 42/2001. By not doing so, the applicant availed the double benefit of duty drawback on export consignment. Therefore, the applicant knowingly/deliberately suppressed the fact by not clearing their exported goods under ARE-2 as required under Notification No. 43/2001.

2. Double benefit of duty drawback and procurement of input material without payment of duty:
The contention of the applicant that neither the assessment of the Shipping Bill has been challenged nor the revenue has filed any appeal against the order of grant of drawback was held to be misleading, not legal, and devoid of any merits. The facts regarding the quantity, FOB value, description of goods, etc., mentioned in the Shipping Bills have not been disputed. The concealment and suppression of the fact of procurement of inputs without payment of duty for use in the manufacture of export goods and not exporting the said goods on the application in Form ARE-2 made the applicant ineligible to claim the drawback.

3. Legal challenge to the assessment of the Shipping Bill:
The applicant argued that no show cause notice can be issued for recovery of drawback without challenging the assessment of the export shipping bill involving the sanction of drawback. The Commissioner (Appeals) relied upon the judgment of the Apex Court in UOI v. Jain Shudh Vanaspati Ltd. and Re-Rolling Mills v. CCE, Bhubaneshwar, which held that there is no need for review under Section 130 and the show cause notice for recovery is correct in cases of clear-cut fraud.

4. Applicability of Rule 3 of the Customs, Central Excise Duties, and Service Tax Drawback Rules, 1995:
The Commissioner (Appeals) upheld the O.I.O. of the Deputy Commissioner, Customs, ICD, Malanpur, on the ground that as per Rule 3 of the Drawback Rules, 1995, no drawback shall be allowed if the export goods are produced or manufactured using imported material or excisable materials in respect of which the duties have not been paid. The Government of India in the RA of M/s. Tata International Ltd. also decided that if the condition of the notification is not fulfilled, the DBK is not admissible.

5. Recovery of duty drawback without challenging the initial assessment:
The applicant argued that unless the assessments made in the shipping bills are set aside, the department cannot recover the duty drawback granted to the applicant merely by issuing a show cause notice. The Government found that show-cause-notice/Adjudication orders under applicable Customs & Central Excise Drawback Rules are proper and sufficient, and there is no mandatory requirement of review of initial orders (sanctioning Drawback) and then raising a demand under other sections like Section 35E(2) of Central Excise Act, 1944 along with Section 11A ibid or Section 128 of the Customs Act, 1962 along with Section 28 of the Act, ibid.

6. Compliance with conditions of Notification No. 68/2007-Cus. (N.T.) and Notification No. 103/2008-Cus. (N.T.):
The Government noted that the applicant procured packing materials without payment of duty under Rule 19(2) of Central Excise Rules, 2002, and exported the manufactured goods. This fact was suppressed by not exporting the said goods under required Form ARE-2. The applicant argued that the condition of non-availment of input benefit under Rule 19(2) read with Notification No. 43/2001-C.E. (N.T.) stands complied with as the applicant has paid back whole of Excise Duty along with interest on the entire inputs so procured. However, the Government found that the deposit of duty later on cannot alter the situation as the violation of the above-mentioned conditions is still there.

Conclusion:
The Government found that the applicant, by procuring duty-free inputs under Rule 19(2) of Central Excise Rules, 2002, contravened the clause (ii) of the second proviso to Rule 3(1) of the Central Excise Drawback Rules, 1995, and therefore no drawback is admissible in this case. The Government upheld the impugned orders and rejected the Revision Application for being devoid of merits.

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