2014 (1) TMI 531 - AT - Customs

Recovery of duty draw back excise portion granted earlier to the merchant exporter on the gound that manufacture has got the refund of cenvat credit - Assessee partially paid the duty - False declarations - Whether the demand is to be sustained in view of para (iv) of Circular 17/97-Cus. and para (vi) of Circular 64/98-Cus. - Held that - As may be seen from para 1(iv) of Circular 17/97-Cus. and para 1(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. However Revenue chose to grant drawback for excise portion also and after lapse of five years to one year, the drawback amounts granted on various shipping bills have been demanded to be paid back. There is also an argument that this appellant is being singled out for such treatment. This argument is relevant not in the sense whether a wrong can be corrected in the hands of one when others go scot free but in the context that there was a bona fide belief because of the circulars from 2001 onwards that they were eligible for the impugned drawback. Court is not inclined to confirm such huge liability for past periods based on Circulars which were in the knowledge of the department and which were not implemented. We would like to rely more on the legal provisions. The only legal provision relied upon is Rule 3 of the Drawback Rules. We agree with the interpretation to this Rule given by the Board in Circular 16/2009-Cus. Interpretation is not applicable from date of issue of Circular 16/2009-Cus. because the Rule has remained the same except for amendment on 13-7-2006, to take care of incidence and rebate of Service Tax - Decided in favour of assessee.

Summary

Issues Involved:
1. Eligibility for excise portion of duty drawback.
2. Requirement of non-availment of Cenvat certificate.
3. Applicability of various circulars issued by the Board.
4. Legality of demand for repayment of drawback.

Issue-wise Detailed Analysis:

1. Eligibility for Excise Portion of Duty Drawback:
The appellants, engaged in the export of ready-made garments and textiles, claimed both customs and excise components of duty drawback on 369 shipping bills during 2003-2007. The Revenue argued that the excise portion was not eligible for drawback as the duties were refunded through the Cenvat Credit Scheme. The department claimed that the appellants had falsely declared eligibility, leading to the issuance of a Show Cause Notice (SCN).

2. Requirement of Non-Availment of Cenvat Certificate:
The SCN alleged that the appellants did not submit the required non-availment of Cenvat certificates as per Circular No. 54/2001-Cus. The Revenue insisted that exporters claiming the excise portion of drawback must produce certificates confirming that Cenvat credit had not been availed. The appellants argued that such certificates were not required for merchant-exporters who purchase goods from the open market.

3. Applicability of Various Circulars Issued by the Board:
The appellants referred to several circulars, including Circular 54/2001-Cus., Circular 8/2003, Circular 19/2005, and Circular 16/2009, to support their claim that merchant-exporters who buy goods from the open market are not required to furnish non-availment of Cenvat certificates. The Revenue relied on earlier circulars, including Circular 17/97 and Circular 64/98, which restricted the benefit of All Industry Rates of Duty Drawback to the customs allocation only for goods procured from the open market.

4. Legality of Demand for Repayment of Drawback:
The Tribunal examined whether the demand for repayment of the excise portion of the drawback was legally sustainable. It was noted that the SCN did not rely on Circulars 17/97 or 64/98, which were the basis for the Revenue's argument. Instead, the SCN cited Circular 54/2001, which was found not applicable to merchant-exporters who procure goods from the open market. The Tribunal concluded that the demand was not justified as the department had granted the drawback based on a bona fide belief and the circulars in effect during the relevant period.

Conclusion:
The Tribunal set aside the impugned order, ruling that the appellants were not required to submit non-availment of Cenvat certificates for goods procured from the open market. The demand for repayment of the excise portion of the drawback was not upheld, and the appeal was allowed. The judgment emphasized the need for a liberal interpretation of the drawback scheme and circulars, considering the bona fide belief of the appellants and the consistent practice followed by the department.