2014 (12) TMI 309 - HC - Customs

Denial of duty drawback - export of Flanges - Deputy Commissioner (DBK), Kandla rejected the said claim by observing that as the petitioner has not used imported material for the manufacture of Flanges, the petitioner will not be entitled to the claim of duty drawback - The said authority, therefore, came to the conclusion that the aforesaid entries i.e. 73.29 and 73.30 cannot be applied to the export of Flanges by the petitioner for claiming duty drawback in the Schedule for 2002-2003 and Entry No. 73.28 in the drawback schedule for the financial year 2003-2004. - Held that - When there is no specific mention with respect to Flanges in the SS No. 73.29, the claim of the petitioners for duty drawback at the rate of ₹ 19 per Kg. as per SS No. 73.29/73.28 is rightly rejected. At this stage it is required to be noted and it is not disputed by Mr. Dave, learned advocate appearing on behalf of the petitioners that Flanges require low grade steel as input and the value of which is very low. So far as the other products as mentioned in SS No. 73.29/73.30 are concerned, they require a high grade steel as input and consequently the value of the same would also be very high. Therefore, Flanges cannot be compared with other produces as mentioned in SS No. 73.29/73.28 as the value of the materials used for production of Flanges and the production of other goods/class of goods would be different and would vary substantially. Therefore, if the contention of the petitioners is accepted that the petitioners shall be entitled to All Industry Duty Drawback at the rate of ₹ 19 per Kg. under SS No. 73.29 at par with other products as mentioned in SS No. 73.29, in that case, as the petitioners had used low grade steel as input in the manufacture of Flanges and the value of which is very low, the petitioners shall be getting duty drawback at the higher amount i.e. ₹ 19 per Kg. which is not permissible. Right from the beginning and when the Notification No. 33 was issued, as such there is no mention with respect to Flanges in the SS No. 73.29. As such, as the controversy had arisen whether on manufacture of export of Flanges duty drawback at the rate of ₹ 19 per Kg. under SS No. 73.29 is available or not, the aforesaid clarificatory Circulars have been issued. That does not mean that it is oppressive circular and therefore, the same is required to be applied prospectively. petitioners have been denied duty drawback as claimed on the ground that the petitioners have failed to give declaration in respect of DBK Claimed under respective SS No as required under Rule 12(1)(a)(ii) of the Customs and Central Excise Duties Drawback Rules, 1995. However, nothing turns on that specifically, as observed hereinabove, Flanges is not included under SS No. 73.29 under which the petitioners have claimed All Industry Duty Drawback at the rate of ₹ 19 per Kg. on Steel content. Under the circumstances, the revisional authority is justified in denying All Industry Drawback Duty as claimed by the petitioners under SS No. 73.29/73.30 on export of Flanges . We see no error in the impugned order passed by the revisional authority - Decided against assessee.

Summary

Issues Involved:
1. Entitlement to All Industry Rates of Duty Drawback for exported goods.
2. Compliance with declaration requirements under the Duty Drawback Rules.
3. Applicability of specific serial numbers in the Duty Drawback Schedule to the exported goods.
4. Validity of clarificatory circulars and their retrospective/prospective application.

Issue-wise Detailed Analysis:

1. Entitlement to All Industry Rates of Duty Drawback for exported goods:
The petitioners claimed duty drawback on exported goods (Flanges) based on All Industry Rates under Entry Nos. 73.29 and 73.28. The claim was denied by the Deputy Commissioner (DBK), Kandla, on the grounds that the petitioners did not use imported material and the claim was disproportionate to the FOB value. The Commissioner (Appeals) allowed the appeal, but the revisional authority reversed this decision, upholding the denial of duty drawback. The court noted that while determining All Industry Rates of Duty Drawback, the relevant data from the Forging Panel of Engineering Export Promotion Council did not include data regarding Flanges, thus justifying the denial of the claim.

2. Compliance with declaration requirements under the Duty Drawback Rules:
The petitioners failed to provide the necessary declaration under Rule 12(1)(a)(ii) of the Customs and Central Excise Duty Drawback Rules, 1995. The revisional authority and the court emphasized that compliance with this requirement is mandatory for claiming duty drawback. The petitioners' failure to submit the requisite declaration and appendices further justified the denial of their claim.

3. Applicability of specific serial numbers in the Duty Drawback Schedule to the exported goods:
The petitioners argued that Flanges, being manufactured through the forging process, should be covered under Entry No. 73.29, which provides a drawback rate of Rs. 19 per kg. However, the court found that there was no specific mention of Flanges under this entry. Additionally, the data provided by the Forging Panel did not include Flanges, and Flanges required low-grade steel as input, unlike other products under the same entry which required high-grade steel. Therefore, the court held that the petitioners' claim under Entry No. 73.29 was rightly rejected.

4. Validity of clarificatory circulars and their retrospective/prospective application:
The petitioners contended that letters issued by the Joint Secretary (Drawback) clarifying that All Industry Rate under Entry No. 73.29 was not applicable to Flanges should be considered clarificatory circulars and applied prospectively. The court rejected this argument, stating that the clarificatory circulars did not change the original notification and were issued to address the controversy regarding the applicability of the drawback rate to Flanges. Therefore, these circulars were not considered oppressive and did not warrant prospective application.

Conclusion:
The court dismissed both petitions, upholding the revisional authority's decision to deny All Industry Rates of Duty Drawback on the export of Flanges. The court found no error in the revisional authority's order and concluded that the petitioners were not entitled to the claimed duty drawback. The petitions were dismissed with no costs.