2013 (9) TMI 827 - HC - Customs

Refund of Duty Drawback Concession Granted Retrospective OR Not - export of readymade garments - Revenue was of the view that the claim was not admissible as the petitioner had procured the goods for export from traders in open market - the petitioner had made false and wrong declaration in the drawback form as he had used the word supplier to avail the drawback - There was suppression of facts - Concession granted to merchant/exporters vide CBEC Circular No.16/2009-Cus on the recommendation of Drawback Committee was not retrospective Held that - Petitioner had not used the word manufacturer or stated that he had got the goods/garments manufactured on job work. Thus, it can be argued that there was no fraud, suppression of facts or misdeclaration by the petitioner. The word supplier used in the form clearly indicates that the goods were purchased from third parties. The show cause notice itself records that the petitioner had not filed details of the job workers or evidence of supporting manufacturer, yet the claim was accepted and payment of drawback was made. The issue raised is covered by decision of this Court in Commissioner of Customs (Export) Vs. Kultar Export 2012 (10) TMI 79 - DELHI HIGH COURT . It is apparent from the said judgment that Government was concerned with the objections and that the distinction between manufacture/job work and trader purchasers had led to difficulties and denial of claims. Therefore, they had issued Circular No.16/2009 stipulating that duty drawback would be admissible even when merchant exporters purchase goods from the local market for export. The respondents were not entitled to recover the drawback which was paid to the petitioner - The petitioner, it was stated, has already refunded the drawback of Rs.4,00,801/- plus paid interest and penalty of Rs.50,000/-Amount of Rs.4,00,801/- along with interest deposited and Rs.50,000/- will be refunded to the petitioner within a period of two months from the date copy of this order was received - In case payment was not made within the said period, the respondents will pay interest @ 10% per annum from the date of this order till payment was made.

Summary

Issues:
1. Refund of duty drawback claimed by the petitioner.
2. Interpretation of Circular No.16/2009 regarding duty drawback eligibility for merchant exporters.
3. Application of previous circulars and legal provisions to determine duty drawback entitlement.

Analysis:

Issue 1: Refund of duty drawback claimed by the petitioner
The petitioner, an exporter of readymade garments, had claimed a duty drawback of Rs.4,00,801/-, which was subsequently challenged by the authorities. The dispute arose from the petitioner's procurement of goods from traders in the open market for export, leading to a show cause notice questioning the eligibility of the claimed drawback. The authorities alleged that the petitioner made false declarations in the drawback form by using the term "supplier" and failed to prove manufacturing or job work involvement. However, the court found that the petitioner's use of the term "supplier" indicated goods were sourced from third parties, and there was no evidence of fraud or misdeclaration by the petitioner.

Issue 2: Interpretation of Circular No.16/2009
The judgment referred to Circular No.16/2009, which aimed to resolve issues related to duty drawback eligibility for merchant exporters who procure goods from the local market for export. The circular allowed duty drawback for such exporters, removing the distinction between manufacturer/job work exporters and trader purchasers. The respondents contended that the circular was prospective from 25th May 2009 and not retrospective. The court cited a previous case, Commissioner of Customs (Export) Vs. Kultar Export, which upheld the applicability of Circular No.16/2009 to merchant exporters, emphasizing the removal of the distinction between different exporter categories.

Issue 3: Application of previous circulars and legal provisions
The court analyzed earlier circulars from 1997, 1998, and 2001, highlighting the evolving provisions for duty drawback entitlement based on the exporter's manufacturing or procurement practices. It noted that duty drawback rules did not differentiate between manufacturer/job work exporters and merchant exporters, as clarified by Circular No.16/2009. The judgment emphasized that the petitioner, as a merchant exporter procuring goods from the open market, was entitled to duty drawback under the prevailing rules. The court concluded that the attempt to reclaim the duty drawback from the petitioner, paid in 2006-2007, was unjustified, as the petitioner had acted in good faith based on the applicable circulars and legal provisions.

In conclusion, the court allowed the writ petition, quashed the impugned order demanding refund, and directed the respondents to refund the duty drawback amount to the petitioner along with interest and penalty. The judgment clarified the entitlement of merchant exporters to duty drawback under Circular No.16/2009, emphasizing the removal of distinctions between different exporter categories in determining eligibility for duty drawback.