2010 (5) TMI 626 - HC - Customs

Drawback under Section 75 of the Customs Act - whether a notification issued under sub-section (1A) of Section 75 is restricted to exporters who apply for drawback as per All Industry Rates and as to whether the same applies to exporters who apply for drawback at Brand Rate also. - Held that - petitioner though applied for drawback at Brand Rate is eligible for drawback on the copper used by them in the manufacture of the imported goods in view of Ext. P7 notification in which copper has been declared as deemed imported material under Section 75(1A) of the Customs Act. Consequently, the petitioner is entitled to claim drawback in respect of the amount of copper used in the manufacture of the goods exported by them, respondents are directed to calculate the amount of drawback available to the petitioner in respect of the goods exported by the petitioner which is the subject matter of Ext. P9 order and disburse the amount due to the petitioner as drawback at the rate applicable as expeditiously as possible, writ petition is allowed as above.

Summary

Issues:
1. Interpretation of Section 75 of the Customs Act regarding drawback on imported materials used in the manufacture of exported goods.
2. Application of notification declaring certain materials as deemed imported material under Section 75(1A) of the Customs Act.
3. Eligibility for drawback under "Brand Rate" versus "All Industry Rate" for exporters.

Analysis:
1. The petitioner, a manufacturer and exporter of insulated copper strips and rectangular paper covered conductors, imports insulation paper and procures copper locally for manufacturing. The petitioner is entitled to drawback under Section 75 of the Customs Act for goods imported. The relevant sections applicable are 75(1) and (1A), allowing drawback on imported materials used in manufacturing exported goods. The petitioner claimed drawback for copper under Ext. P7 notification, which was initially rejected but reconsidered following a court direction (Ext. P8).

2. The Government issued Ext. P7 notification under Section 75(1A), declaring materials, including copper, used in exported goods as deemed imported material. The petitioner sought drawback for copper used in manufacturing exported goods under Rule 6, based on actual duty incidence. However, the Ministry rejected the claim, stating that the deemed import material concept under Section 75(1A) is for "All Industry Rates" and not "Brand Rates." The court found this interpretation erroneous, as Section 75 and Ext. P7 do not restrict drawback eligibility based on rate application.

3. The court held that the distinction between "All Industry Rates" and "Brand Rates" is for determining the amount of drawback, not for deciding eligibility. Ext. P9 order was deemed unsustainable as it wrongly restricted drawback eligibility for exporters applying at "Brand Rates." The petitioner was declared eligible for drawback on copper under Ext. P7 notification and directed to receive the due amount within three months. Ext. P9 was quashed, and the writ petition was allowed in favor of the petitioner.