2018 (8) TMI 1934 - CGOVT - Customs

Recovery of Duty Drawback - Commissioner (Appeals) restricted the recovery of drawback relating to the packaging materials only and allowed drawback on other inputs - the revision application has been filed by the applicant mainly on the ground that the All Industry Rates are average rates and the department cannot check duty paid character of inputs; that the inputs were not procured under Rule 19(2) of Central Excise Rules 2002; that the inputs were procured from unregistered SSI units against H form; that no method/authority is prescribed for reduction of all industry rates of drawback under the Drawback Rules 1995 and the recovery of drawback can be effected within a reasonable period only. HELD THAT - The Government has examined the matter and found force in the argument of the applicant that the All Industry Rates of Drawback are fixed by the Government after considering the average incidence of duty and taxes on the inputs and services used in the exported products. Thus these are general rates and drawback at All Industry Rates is payable in respect of the export goods to the exporter without examining the duty paid character of each input. The applicability of these rates to different commodities is certainly subject to Drawback Rules 1995 and Notification Nos. 68/2007-Cus. (N.T.) dated 16-7-2007 103/2008-Cus. (N.T.) dated 29-8-2008 84/2010-Cus. (N.T.) dated 17-9-2010 and 68/2011-Cus. (N.T.) dated 22-9-2011. One of such conditions stipulated in all the above said notifications as per which the All Industry Rate shall not be applicable to a commodity was that the exported goods should not have been manufactured or exported by availing the rebate of duty on material used in the manufacture of such commodity or manufactured or exported in terms of sub-rule (2) of Rule 19 of Central Excise Rules 2002. But no such case has been made out in the Order-in-Original and Order-in-Appeal that the applicant had manufactured and exported the goods by availing the rebate of duty on inputs or by availing the facility provided under sub-rule (2) of Rule 19 of Central Excise Rules 2002. Therefore there is no basis for denying the drawback of duty at All Industries Rate in this case or restricting it to few inputs only for the reason that the packaging materials were procured without payment of duty from unregistered units. The Government agrees with the contention of the applicant that the Commissioner (Appeals) has passed the Order-in-Appeal erroneously by denying the drawback of duty on packaging materials on the ground that these were procured without payment of Central Excise duty from unregistered unit against form H issued by the State VAT. The error of denying the drawback in the above situation seems to have been realised by the respondent itself subsequently inasmuch as no such action was initiated against any of such exporter after show cause notice was issued in this case as per the RTI reply of the Deputy Commissioner ICD Agra itself. Revision application allowed.

Summary

Issues:
1. Denial of duty drawback on packaging materials procured from unregistered units against 'H' form.
2. Interpretation of All Industry Rates of Drawback.
3. Authority to examine duty paid character of inputs before sanctioning drawback.

Analysis:

1. The applicant filed a Revision Application against the Commissioner (Appeals)'s Order partially allowing their appeal against the Assistant Commissioner's Order confirming the recovery of duty drawback on packaging materials procured duty-free. The applicant argued that the All Industry Rates are average rates and the department cannot check the duty paid character of inputs, emphasizing that the recovery of drawback should be within a reasonable period. The Government found merit in the applicant's argument that All Industry Rates are fixed by considering the average incidence of duty and taxes on inputs used in exported products, and are payable without examining the duty paid character of each input.

2. The Government highlighted that the denial of drawback on packaging materials was based on the procurement from unregistered units against 'H' form, equated by the Commissioner (Appeals) with procurement under Rule 19(2) of Central Excise Rules, 2002. However, the Government found no basis for restricting the drawback, as the condition for denial did not apply to the applicant's case. The Government emphasized that the Commissioner (Appeals) erred in equating procurement against 'H' form with Rule 19(2) and wrongly relied on a previous order not applicable to the current situation. The Government clarified that field officers are not empowered to examine the duty paid character of each input before sanctioning drawback at All Industry Rates.

3. The Government concluded that the Commissioner (Appeals) erroneously denied the drawback on packaging materials procured without payment of Central Excise duty, as this denial was not supported by the relevant laws and notifications. The Government agreed with the applicant's contention that the denial was unjustified, as evidenced by the lack of action against exporters in similar situations. Consequently, the Order-in-Appeal was set aside, and the revision application was allowed, emphasizing the incorrectness of the denial of duty drawback in the applicant's case.