2016 (5) TMI 558 - AT - Customs

Eligibility of drawback and imposition of penalty - Section 114AA of the Customs Act, 1962 - Export of fabrics to Bangladesh to perform the job of CMT (Cutting/Making/Trimming) to make finished garments exported directly to Europe from Bangladesh - Sale proceeds are received by the appellant from third country from the buyer of the garments - Drawback disallowed as export of fabrics to Bangladesh does not involve sales and no foreign exchange remittances have come to the Appellant from its job workers in Bangladesh. Held that - Rule 16A of DBK Rules, 1995 does refer to recovery of amount of DBK where sale proceeds are not realized. At the same time Rule 12(1)(b) and Rule 13(2)(i) also indicate that export of goods need not always be on a sale invoice or a Letter of Credit (LC). The above provisions convey that goods could be exported without a sale. The sale proceeds of the finished garments are received from the third country buyer and is received by the appellant directly from the garment purchaser which is more than the value of fabrics at which drawback is claimed. In the present case the products meant to realize foreign exchange are the garments which are manufactured through job-workers in Bangladesh. The pattern of sale has been made clear by the exporter at the time of exports. Under the existing factual matrix of the case it can not be said that proceeds of the fabrics exported have not been realized and accordingly it is held that provisions of Rule 16A of the DBK Rules are not attracted. Drawback disallowed because as per the reports of the jurisdictional Central Excise officers the supporting manufactures of fabrics do not exist - Held that - appellant has produced certificates from the jurisdictional Central Excise officers to the effect that supporting manufacturers of exported fabrics are not registered in their jurisdiction. If a manufacturing unit is exempted then it may not be registered with the jurisdictional Central Excise authorities. However, non-registration of units do not necessarily mean that such non-registered units are not existing. On this issue exporters were facing difficulty and CBEC vide Circular No.16/2009-Customs dated 25.05.2009 gave the clarification. Here, there is no point of questioning the Cenvat Credit taken by manufacturers of fabrics as those are not registered with Central Excise, which means no Cenvat Credit on inputs has been taken. Therefore, the Order-in-Original is set aside. - Decided in favour of appellant with consequential relief

Summary

Issues:
- Eligibility of the Appellant for Duty Drawback (DBK) on fabrics exported to job-workers in Bangladesh and then sent to a third country as garments.
- Rejection of DBK claim by the Adjudicating authority on the grounds of no sale proceeds from job-workers and non-existence of supporting manufacturers of fabrics.

Analysis:
1. Eligibility for Duty Drawback (DBK):
The main issue in this case was whether the Appellant was entitled to DBK on fabrics exported to job-workers in Bangladesh and subsequently sent as garments to a third country. The Adjudicating authority rejected the DBK claim based on the argument that no sale proceeds were received from job-workers in Bangladesh. However, the Appellant contended that the sale proceeds for the garments were received directly from the third country buyer, which included the proportionate price of the fabric used in the garments. The Appellant cited relevant provisions of the Customs, Central Excise, and Service Tax Drawback Rules, indicating that goods could be exported without a sale invoice or a Letter of Credit. The Tribunal observed that the sale proceeds realized by the Appellant from the third country buyer encompassed the value of the fabrics, justifying the eligibility for DBK.

2. Non-Existence of Supporting Manufacturers:
The Adjudicating authority also rejected the DBK claim on the grounds that the supporting manufacturers of the exported fabrics were reported not to exist by jurisdictional Central Excise officers. However, the Appellant presented certificates from the Central Excise officers stating that the supporting manufacturers were not registered in their jurisdiction. The Tribunal noted that non-registration did not necessarily imply non-existence, especially in cases where manufacturing units might be exempted from registration. Referring to a CBEC Circular, the Tribunal clarified that merchant exporters purchasing goods from the local market for export were entitled to full DBK. The Tribunal emphasized that the absence of Cenvat Credit on inputs due to non-registration did not invalidate the Appellant's claim for DBK.

3. Decision:
After considering the arguments from both sides and examining the case records, the Tribunal allowed the Appeal filed by the Appellant, setting aside the Order-in-Original that disallowed the DBK claim. The Tribunal's decision was based on the interpretation of relevant rules and provisions, the clarification provided in the CBEC Circular, and the supporting documentation presented by the Appellant. The Appellant was granted consequential relief as per the Tribunal's order.

This detailed analysis of the judgment highlights the key issues, arguments presented by both parties, legal interpretations, and the final decision rendered by the Tribunal in favor of the Appellant.