2012 (10) TMI 79 - HC - Customs

Denial of drawback - whether the demand is to be sustained in view of para(iv) of Circular 17/97-Cus and para (vi) of Circular 64/98 though these are not relied upon in SCN ? - Held that - The only relevant information was that the Appellant was a merchant exporter which was always known to the department. As may be seen from para 1(iv) of Circular 17/97-Cus and para1(vi) of Circular 64/98-Cus there was no question of taking any declaration from merchant exporters who buy goods from the open market as in the case of this Appellant but the drawback was supposed to be restricted to the customs portion only. That merchant exporters who did not get the garments manufactured or stitched through a job workers but who procured goods from the open market were treated differently and an entirely different set of procedures always existed by virtue of Circulars of 1997 and 1998. The rationale for this was that goods were sourced from diverse suppliers and the authorities were alive to difficulty in securing certificates about duty credit. All these changed in 2003 with the issuance of Circular No.8/2003 it has been decided that instead these manufacturer exporters and merchant exporters with a supporting manufacturer shall be required to give a self-declaration that such manufacturer-exporters or the supporting manufacturers are not registered with Central Excise and that they do not avail / have not availed Cenvat facility. The form of self-declaration is enclosed. The assessee is not a manufacturer but only procures or sources goods from the Indian market and exports them. Therefore it availed the benefit of All India rates of duty drawback a notional concept applicable to such class of exporters. None of the circulars cited by the department required the assessee to follow the procedure which is now mandated in 2009. The previous circulars of 1997 and 1998 as well as the circular of 2003 clearly visualized that duty drawback was restricted excluding duty credit availed in the case of manufacturers who also got their job work done. Exporters of goods purchased from the market were to be treated as having availed Modvat facility. Thus the exports had been finalized and duty drawback paid as long back as in 2006-2007 the attempt to reopening the entire issue by the petitioner was clearly unwarranted - in favour of assessee.

Summary

Issues Involved:
1. Validity of the Tribunal's findings in light of Customs Circulars.
2. Eligibility for duty drawback claimed by the respondent.
3. Applicability of procedural requirements for merchant exporters.
4. Legality of reopening the issue after a significant time lapse.

Detailed Analysis:

1. Validity of the Tribunal's Findings in Light of Customs Circulars:

The Commissioner of Customs (Export) challenged the Tribunal's decision, arguing that it disregarded Circular Nos. 17/97-Cus, 64/98-Cus, and 44/01-Cus. The Tribunal examined these circulars and found that Circular No. 19/09-Cus, issued after the show cause notice, was not applicable. The Tribunal concluded that Circular No. 54/2001-Cus did not apply to merchant exporters who procure goods from the open market, thus invalidating the basis of the show cause notice.

2. Eligibility for Duty Drawback Claimed by the Respondent:

The respondent, a merchant exporter of readymade garments and textiles, claimed duty drawback on inputs used in the manufacture of exported items. The Commissioner of Customs alleged that the respondent fraudulently obtained in-admissible drawbacks and failed to provide necessary documentation. The Tribunal held that there was no fraud or misrepresentation by the respondent, as the duty drawback was claimed according to the prescribed procedures under the Customs and Central Excise Drawback Rules, 1995.

3. Applicability of Procedural Requirements for Merchant Exporters:

The Tribunal noted that the respondent did not engage in job work but procured ready-made garments and textiles from the market. Circular Nos. 17/97-Cus and 64/98-Cus specified that merchant exporters who procure goods from the open market are treated as having availed the Modvat facility and are not entitled to the Central Excise allocation of the All Industry Rate of Drawback. Circular No. 8/2003 allowed merchant exporters to furnish a self-declaration instead of obtaining certificates from Central Excise Authorities, which the respondent complied with.

4. Legality of Reopening the Issue After a Significant Time Lapse:

The Tribunal found that the attempt to reopen the issue after the duty drawback had been paid and exports finalized as far back as 2006-2007 was unwarranted. The Tribunal emphasized that the legal provisions and circulars in place at the time of export did not mandate the procedures now being enforced. The Tribunal relied on Rule 3 of the Customs and Central Excise Drawback Rules and Circular No. 16/2009-Cus to support its decision.

Conclusion:

The High Court upheld the Tribunal's decision, finding no infirmity in its order and no substantial question of law for consideration. The appeal was dismissed, affirming that the respondent, as a merchant exporter who procured goods from the open market, was not required to follow the procedures applicable to manufacturers or those engaging in job work. The duty drawback claimed was in accordance with the legal provisions and circulars existing at the time of export.