2018 (6) TMI 727 - AT - Customs

Duty Drawback - All Industry Rate (AIR) - Excise portion of AIR - FIBCs exported by the appellants - CENVAT credit used - whether the appellants will be entitled to AIR only for the customs component (in case Cenvat credit was used) or for the higher rate including the excise as well as customs components? - Held that - The circular has clarified the payment of drawback in respect of the goods which are purchased by merchant exporters from traders in the local market. There is a presumption that the goods available in the market are deemed to be duty paid - But in the facts of the present case, it is evident that the appellant has not procured the export goods from any trader in the market but directly from the manufacturer who has paid the central excise duty on such goods by availing Cenvat credit. The term Cenvat credit has not been availed has been explained to mean that no Cenvat facility has been availed for any of the inputs or input services used in the manufacture of the export products - Since the manufacturer has availed the benefit of CENVAT credit and the same is not in dispute, we are of the view that the appellant will not be entitled to the excise portion of AIR. Appeal dismissed - decided against appellant.

Summary

Issues:

1. Entitlement to higher rate of duty drawback under All Industry Rate (AIR) for exported goods.
2. Interpretation of conditions for availing AIR for drawback.
3. Application of Circular No. 16/2009-Cus. dated 25.05.2009 in determining duty drawback eligibility.
4. Impact of manufacturer's availing of Cenvat credit on exporter's entitlement to drawback rates.

Issue 1: Entitlement to higher rate of duty drawback under All Industry Rate (AIR) for exported goods:

The appellant exported Flexible Intermediate Bulk Container Bags (FIBC) and claimed duty drawback under the AIR. The dispute arose as the manufacturer had availed Cenvat credit for payment of duty on the goods sold to the appellant, affecting the appellant's entitlement to the higher rate of drawback under the AIR. The appellant argued for the higher rate, emphasizing that they had not claimed any Cenvat credit themselves. The Revenue contended that the goods were manufactured with Cenvat credit, making the appellant eligible only for the lower rate of drawback. The Tribunal examined the facts and arguments, ultimately upholding the Revenue's decision to recover a part of the drawback paid to the appellant.

Issue 2: Interpretation of conditions for availing AIR for drawback:

The Tribunal analyzed the relevant Notification No. 103/2008-Cus, which specified conditions for availing AIR for drawback. The notification clarified that the exporter must declare and establish that no Cenvat facility was availed for inputs used in manufacturing the export products to qualify for the higher drawback rate. Considering that the manufacturer had utilized Cenvat credit for duty payment, the Tribunal concluded that the appellant, who exported the goods, would not be entitled to the excise portion of AIR. This interpretation guided the Tribunal's decision to reject the appellant's claim for the higher drawback rate.

Issue 3: Application of Circular No. 16/2009-Cus. dated 25.05.2009 in determining duty drawback eligibility:

The appellant relied on Circular No. 16/2009-Cus. dated 25.05.2009, which addressed duty drawback for merchant exporters purchasing goods for export. However, the Tribunal noted that the circular applied to goods bought from traders in the local market, not directly from manufacturers who availed Cenvat credit. The Tribunal highlighted the distinction between the circumstances outlined in the circular and the appellant's case, where the goods were procured from a manufacturer benefitting from Cenvat credit. This distinction led to the Tribunal's decision against granting the higher drawback rate to the appellant.

Issue 4: Impact of manufacturer's availing of Cenvat credit on exporter's entitlement to drawback rates:

The Tribunal scrutinized the impact of the manufacturer's utilization of Cenvat credit on the exporter's entitlement to drawback rates. It was established that the manufacturer had availed Cenvat credit for duty payment on the goods sold to the appellant for export. This utilization of Cenvat credit by the manufacturer influenced the Tribunal's determination that the appellant could not claim the higher rate of drawback under the AIR. The Tribunal's analysis of this factor contributed significantly to the decision to sustain the Revenue's order and reject the appellant's appeal for the higher drawback rate.

In conclusion, the judgment delves into the intricacies of duty drawback entitlement under the AIR, emphasizing the impact of Cenvat credit utilization by manufacturers on exporters' eligibility for higher drawback rates. The Tribunal's detailed analysis of relevant notifications and circulars culminated in the decision to uphold the lower drawback rate for the appellant, highlighting the importance of compliance with specified conditions for claiming duty drawbacks in export transactions.