2016 (7) TMI 416 - CGOVT - Customs

Claim of duty drawback on inputs - manufacture and export of various brands of liquor - The sanctioning authority disallowed drawback on the declared input molasses - According to the authority, (1) As per proviso (ii) to Rule 3 of the Drawback Rules, no drawback is allowable on the excisable materials in respect of which duties or taxes have not been paid and applicant have not provided evidence of direct duty payment on molasses. - (2) The applicants have been procuring Extra Neutral Alcohol (ENA) and not the molasses. Also no evidence of duty payment on ENA has been submitted. Held that - in the present case the applicants have not furnished any such document in respect of their input molasses and have admitted that they have not even procured declared input i.e. molasses on which they had claimed duty drawback. The applicants had also claimed that duty drawback rate could have been computed on the incident of payment of duty on the ENA procured by them. Government notes that the ENA has not been declared as an input of the impugned goods by the applicants in their duty drawback application. The applicants have not produced any document evidencing payment of duty by them on the ENA. The applicant has contended that All Industry Rate of ENA be allowed to them as per Board s Circulars No. 19/2005-Cus dated 21.03.2005 and 83/2003-Cus dated 18.09.2003. It has been noted that Board s Circular No. 19/2005 clarifies that fixation of All Industry Rate of Duty Drawback is not to be probed by the field formations and the Circular No. 83/2003 is applicable to All Industry Rate of Duty Drawback brand rate fixation in respect of three finished products viz Leather Articles, Bicycle and Complete Bus. It also provides as a requirement the production of invoices confirming receipt of ENA indicating its local price and the consumption norms thereof. Therefore the contention of the applicant for allowing All Industry Rate of ENA to be allowed is not applicable. Revision application rejected - Decided against the applicant.

Issues Involved:
1. Denial of duty drawback on molasses.
2. Evidence of duty payment on Extra Neutral Alcohol (ENA).
3. Compliance with Drawback Rules and submission of required documents.
4. Applicability of All Industry Rate of Duty Drawback.
5. Alleged violation of principles of natural justice.

Issue-wise Detailed Analysis:

1. Denial of duty drawback on molasses:
The applicants claimed duty drawback on inputs including molasses. However, the drawback sanctioning authority disallowed the drawback on molasses on the grounds that no evidence of direct duty payment on molasses was provided, and the applicants were procuring ENA instead of molasses. The appellate authority upheld this decision, noting that the applicants failed to produce the required evidence of duty payment on molasses.

2. Evidence of duty payment on Extra Neutral Alcohol (ENA):
The applicants contended that they had provided evidence of duty payment on molasses used in the manufacture of ENA supplied to them. They argued that the Drawback Rules do not specify that the duty payment evidence must be in the name of the manufacturer of the export product. However, the government observed that the applicants did not furnish any documents evidencing duty payment on ENA, nor did they produce any invoices for the procurement of ENA.

3. Compliance with Drawback Rules and submission of required documents:
The government noted that the applicants failed to comply with the procedures laid down under the relevant rules, particularly in submitting the required DBK statements and original invoices evidencing payment of Central Excise duty. The applicants admitted to not procuring molasses and instead claimed duty drawback on ENA, which was not declared as an input in their duty drawback application.

4. Applicability of All Industry Rate of Duty Drawback:
The applicants argued that the All Industry Rate of ENA should be allowed as per Board's Circulars. However, the government found that the cited circulars were not applicable to their case. The circulars clarified that the fixation of All Industry Rate of Duty Drawback is not to be probed by field formations and applied to specific finished products, which did not include the applicants' products.

5. Alleged violation of principles of natural justice:
The applicants claimed that the principles of natural justice were violated as no show cause notice was issued before rejecting their claim. The government observed that the Drawback Rules are a complete code in themselves, laying down the procedure for fixation and payment of brand rate of duty drawback. The applicants had the option to file a supplementary claim within three months of the original drawback claim, which they failed to do.

Conclusion:
The government rejected the revision application, noting that the applicants did not provide the necessary evidence of duty payment on molasses or ENA, failed to comply with the Drawback Rules, and did not follow the prescribed procedures for filing supplementary claims. The denial of duty drawback on molasses and the rejection of the appeal were upheld, and the principles of natural justice were deemed to have been followed. The revision application was thus rejected as devoid of merit.

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