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2016 (6) TMI 346 - HC - CustomsAvailability of benefit of duty drawback - Export of final product - Importer utilises DEPB scrip for the purpose of customs duty on inputs and raw materials - Held that - in exercise of powers under section(2) of section 75, the Drawback Rules of 1995 have been framed. In terms of rule 3 of the said Rules of 1995, drawback is allowed on export of goods at such rates as may be determined by the Central Government. Under further proviso to rule 3 however, such drawback would not be available in various categories specified therein. None of these categories include the payment of customs duty on the goods through DEPB scrip. In other words, rule 3 does not prohibit a claim of drawback as per the specified rates if the duty on the imported goods is not paid in cash but by surrendering credit in the DEPB scrip. Thus neither section 75 of the Customs Act, nor rule 3 of the Rules of 1995, provide any restriction on claim of drawback, if the basic duty of customs is paid through DEPB. - Decided in favour of petitioner
Issues Involved:
1. Whether duty drawback is available when customs duty on inputs is paid through DEPB scrip. 2. Interpretation of relevant statutory provisions and notifications concerning duty drawback. 3. Applicability of duty drawback under various export incentive schemes like VKGUY, FMS, and FPS. Issue-wise Detailed Analysis: 1. Availability of Duty Drawback When Customs Duty is Paid Through DEPB Scrip: The petitioner challenged the denial of duty drawback on the grounds that customs duty was paid using DEPB scrip. The Additional Commissioner of Customs rejected the application for duty drawback, stating that imports made under the DEPB scheme are exempt from customs duty. However, the Commissioner (Appeals) allowed the appeal, referring to Board Circular No. 41/2005, which clarified that additional customs duty paid through DEPB scrip is eligible for brand rate duty drawback. The department's revision petition was allowed by the Government of India, which interpreted Notification No. 97/2009 to limit the benefit of duty drawback only to additional duty under Section 3 of the Customs Tariff Act, excluding basic customs duty paid through DEPB scrip. 2. Interpretation of Statutory Provisions and Notifications: The court examined Section 75 of the Customs Act, 1962, which allows the Central Government to issue notifications for duty drawback on imported materials used in the manufacture of exported goods. The Drawback Rules of 1995, particularly Rule 3, do not prohibit the claim of duty drawback if customs duty is paid through DEPB scrip. The court noted that neither Section 75 nor the Rules of 1995 impose any restriction on claiming duty drawback when basic customs duty is paid through DEPB scrip. The court also referred to Board Circulars No. 41/2005 and No. 26/2007, which allowed additional customs duty paid through DEPB scrip to be adjusted as CENVAT credit or duty drawback, but did not explicitly restrict the drawback on basic customs duty. 3. Applicability of Duty Drawback Under Various Export Incentive Schemes: The court discussed other export incentive schemes like VKGUY, FMS, and FPS, which provide duty credit scrips as incentives for exports. These schemes aim to neutralize disadvantages faced by exporters, such as high transport costs. The court held that disqualifying duty paid through these scrips for duty drawback would indirectly deny the benefit of these export incentive schemes. The court emphasized that these schemes are intended to make exports viable and competitive, and the duty credit scrips should be considered as payment of customs duty for the purpose of claiming duty drawback. Conclusion: The court allowed the petitions, reversing the impugned orders and remanding the proceedings back to the original authority for fixation of the brand rate of duty drawback. The court concluded that duty drawback is available when customs duty is paid through DEPB scrip, and the relevant statutory provisions and notifications do not prohibit such claims. The court also clarified that export incentive schemes should not be undermined by denying duty drawback on the basis of how the duty was paid.
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