2015 (9) TMI 765 - CGOVT - Customs

Rate of duty drawback Reversal of Cenvat credit Applicants claimed duty drawback under All Industries Rate (AIR) of Drawback on their export Department availed Cenvat credit of input services and therefore, it appeared that they were not eligible for drawback @ 14.8% but eligible for drawback at lesser rate of 3% JS(RA) remanded matter back with directions to carry out verification In remand proceedings, Commissioner (Appeals) rejected appeal filed by applicant, without carrying out any verification as directed by JS (RA) Held that - if any amount has been availed as credit on any inputs, used in manufacture of final product, then such Cenvat credit should be reduced from eligible drawback Rate of drawback applicable for different exports are notified by Government by issuing Notification under Rule 3(1) of Drawback Rules after considering all relevant factors Admittedly drawback claims sought to be reduced @ 3% instead of 14.8% @ as claimed by applicant on ground that applicant availed Cenvat credit on input services. Reversal of Cenvat credit before utilization amounts to non-taking of credit that such reversal can be done subsequent to export of goods In present case applicant made proportionate reversal of Cenvat credit before utilization of same There are no substantial material evidences to support allegation of mala fide intention on part of applicant Since, applicant has reversed proportionate Cenvat credit availed on input services when dispute arose and claimed that said amount was not utilized and remained in balance, so this reversal has also to be treated as non-availment of Cenvat credit on input services Therefore applicant entitled for drawback claims at higher rate @ 14.88% Impugned Order set aside and revision application allowed Decided in favour of Assesse.

Issues Involved:
1. Eligibility for duty drawback at the rate of 14.8% versus 3% due to availment of Cenvat credit.
2. Compliance with pre-deposit orders.
3. Verification of claims regarding partial availment and reversal of Cenvat credit.
4. Interpretation of relevant notifications and rules regarding Cenvat credit and duty drawback.

Detailed Analysis:

1. Eligibility for Duty Drawback at 14.8% vs. 3%:
The applicants, manufacturers of Synthetic Yarn, exported goods and claimed duty drawback at 14.8% on the basis that they had not availed Cenvat credit. However, the department later discovered that the applicants had availed Cenvat credit on input services, making them eligible for only a 3% drawback rate. The department issued a show cause notice and confirmed the demand for the recovery of the excess drawback amount of Rs. 67,51,419/- along with interest, under Rule 16 of the Customs, Central Excise, and Service Tax Drawback Rules, 1995.

2. Compliance with Pre-Deposit Orders:
The applicants appealed the Order-in-Original but failed to comply with the pre-deposit order of Rs. 67,51,419/- along with interest, leading to the rejection of their appeal by the Commissioner (Appeals). The Joint Secretary (Revision Application) later reduced the pre-deposit requirement to 25% of the demanded amount and remanded the case for a decision on merits after necessary verification.

3. Verification of Claims Regarding Partial Availment and Reversal of Cenvat Credit:
The applicants claimed that they had availed only partial Cenvat credit and had reversed a portion of it. They argued that the Commissioner (Appeals) failed to verify these claims as directed by the Joint Secretary (Revision Application). The applicants provided documentary evidence, including invoices and input service credit registers, to substantiate their claims. The Commissioner (Appeals) did not address these claims in his order, which was seen as a violation of principles of natural justice.

4. Interpretation of Relevant Notifications and Rules:
The case involved the interpretation of Notification No. 68/2007-Cus. (N.T.) and Notification No. 103/2008-Cus. (N.T.). The applicants argued that the condition of non-availment of Cenvat credit on inputs did not include input services for the period in question. The government noted that Rule 3(1) of the Drawback Rules, 1995, and the relevant notifications implied that non-availment of Cenvat credit on inputs included input services as well. The government concluded that the inclusion of "input services" in Notification No. 103/2008-Cus. (N.T.) merely clarified an already implicit condition.

Judgment:
The government observed that the applicants had proportionately reversed the Cenvat credit before utilization, which amounted to non-availment of credit, as established by various judicial precedents, including the Supreme Court's judgment in CCE, Mumbai-I v. Bombay Dyeing Ltd. The government found that the applicants were entitled to the higher drawback rate of 14.8% as initially sanctioned. The impugned Order-in-Appeal was set aside, and the revision application was allowed, confirming the initial sanction of the drawback claim at 14.8%.

Conclusion:
The revision application succeeded, and the applicants were entitled to the higher duty drawback rate of 14.8%. The government set aside the impugned Order-in-Appeal and ordered in favor of the applicants.

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