2014 (9) TMI 145 - HC - Customs

Claim of Brand Rate of drawback under Rule 7 of the Customs, Central Excise Duties and Service Tax Drawback Rules, 1995, after having availed of the All Industry Rate of drawback under Rule 3. - claim the differential amount - Held that - we do not find that there is any prohibition set out in the Drawback Rules which debars an exporter from seeking determination of the Brand Rate of drawback under Rule 7, merely because at the time of export, he had already claimed the All Industry Rate of drawback under Rule 3. In fact, to our mind, the Rules seem to suggest otherwise - if the rate of drawback as determined under Rule 3 is more than 4/5th (80%) of the duties or taxes paid on the inputs/input services used, then the application made under Rule 7(1) would have to be rejected. The manufacturer or exporter is not barred from seeking a determination of the Brand Rate of drawback under Rule 7 merely because, at the time of export, he had applied for and granted drawback at the All Industry Rate as determined under Rule 3. - Decided in favor of assessee.

Issues Involved:
1. Maintainability of the Writ Petition.
2. Interpretation of Rule 3 vis-a-vis Rule 7 of the Drawback Rules.
3. Validity of the CBEC Circular dated 30th December, 2011.
4. Legality of the impugned orders rejecting the applications for determination of the Brand Rate of drawback.

Issue-wise Detailed Analysis:

1. Maintainability of the Writ Petition:
The Respondents raised a preliminary objection regarding the maintainability of the Writ Petition, arguing that the Petitioner had not exhausted the alternate remedies available under the Customs Act, 1962, specifically under section 129DD. The Court acknowledged that while the Petitioner had not availed the alternate remedy, the primary reason for rejecting the Petitioner's applications was the CBEC Circular dated 30th December, 2011, which could not be challenged under the Act or the Rules. The Court held that the availability of an alternate remedy is not an absolute bar to entertaining a writ petition, especially when the issues raised are purely legal and there are no disputed questions of fact. Thus, the preliminary objection was rejected, and the Writ Petition was entertained on merits.

2. Interpretation of Rule 3 vis-a-vis Rule 7 of the Drawback Rules:
The Court examined whether an exporter, who has claimed and been granted drawback at the All Industry Rate under Rule 3, is barred from making an application for determination of the Brand Rate of drawback under Rule 7. The Court noted that Rule 3 deals with the All Industry Rate of drawback, while Rule 7 allows for the determination of the Brand Rate of drawback if the All Industry Rate is less than 4/5th (80%) of the actual duties suffered on the inputs. The Court found no provision in the Drawback Rules that barred an exporter from seeking the Brand Rate of drawback under Rule 7 merely because they had initially claimed the All Industry Rate under Rule 3. The Court emphasized that the word "finds" in Rule 7 suggests that the exporter can apply for the Brand Rate upon realizing that the All Industry Rate is insufficient. Therefore, the Court held that the manufacturer or exporter is not barred from seeking the Brand Rate of drawback under Rule 7 after claiming the All Industry Rate under Rule 3.

3. Validity of the CBEC Circular dated 30th December, 2011:
The Circular stated that an exporter who has availed the All Industry Rate of drawback at the time of export cannot file for the determination of the Brand Rate of drawback under Rule 7. The Court found that this interpretation imposed limitations not provided for in the Drawback Rules and effectively whittled down the Rules. The Court held that the CBEC, under the guise of clarifying the Rules, cannot incorporate restrictions not present in the Rules. Consequently, the Court struck down clause (d) of the Circular as ultra vires the Drawback Rules and the Act.

4. Legality of the Impugned Orders:
The impugned orders/letters dated 19th April 2012, 11th June 2012, and 24th July 2012, which rejected the Petitioner's applications for the Brand Rate of drawback, were primarily based on the CBEC Circular. Given that the Circular was found to be unsustainable, the Court also set aside the impugned orders/letters. The Court directed the Respondents to accept and process the Petitioner's applications for the Brand Rate of drawback as per Rule 7 of the Drawback Rules, while retaining the authority to reject non-compliant applications in accordance with the law.

Conclusion:
The Writ Petition was granted, and the rule was made absolute in terms of prayer clauses (a) and (b). The Respondents were directed to process the Petitioner's applications for the Brand Rate of drawback as per Rule 7, with the provision to reject non-compliant applications in accordance with the law. No order as to costs was made.

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