2020 (1) TMI 906 - HC - Customs

Vires of Policy Circular Nos.6 and 35 - denial of benefit of the DEPB or Duty Drawback - HELD THAT - There is no merit in the present intra Court Appeals filed by the Revenue and the view of the learned Single Judge deserves to be upheld - We are of the opinion that the Circulars like Circular No.74/1999-Cus dated 05.11.1999 as well as the Circular No.31/2000-Cus dated 20.04.2000 could not have restricted or denied the benefit of Drawback or DEPB if such manufacturing was done by 100% EOU Units and then exports were made by such 100% EOUs. The denial of benefit to the Assessee under the guise of a clarification for which, no power was bestowed on the Central Board. More so, if such Circulars come in direct conflict with clear statutory provisions of law or Import Export Policy having statutory character. Appeal dismissed.

Summary

Issues Involved:
1. Whether Policy Circular Nos.6 and 35 can override statutory provisions.
2. Entitlement of the Assessee to DEPB or Duty Drawback benefits.
3. Validity of Circulars restricting statutory benefits.
4. Relevance of previous judgments and circulars in similar cases.

Detailed Analysis:

1. Whether Policy Circular Nos.6 and 35 can override statutory provisions:
The learned Single Judge held that Policy Circular Nos.6 and 35 could not override the statutory provisions in favor of the Assessee for granting the benefit of the DEPB or Duty Drawback. The statutory policy, specifically the Export Import Policy for the relevant year, formulated under Section 5 of the Foreign Trade (Development and Regulation) Act, 1992, has the force of law. Therefore, the benefits flowing from this policy cannot be denied based on the policy Circulars. The rejection of the Assessee's request for eligibility under the DEPB Scheme was deemed unsustainable in law.

2. Entitlement of the Assessee to DEPB or Duty Drawback benefits:
The Assessee, operating in the Domestic Tariff Area (DTA), was entitled to the benefits of DEPB/Duty Drawback for exporting goods manufactured through a 100% Export Oriented Unit (EOU). The relevant Export Import Policy, particularly para 7.17, allowed for such benefits. The learned Single Judge referenced the Karnataka High Court's decision in Karle International Vs. Commissioner of Customs, Bangalore, which supported the view that statutory rights under the Export Import Policy cannot be negated by Circulars.

3. Validity of Circulars restricting statutory benefits:
The judgment emphasized that departmental Circulars issued by the Central Board cannot restrict or curtail benefits conferred by statutory provisions. Circulars like No.74/1999-Cus and No.31/2000-Cus were found to be in direct conflict with the statutory provisions of the Export Import Policy. Such Circulars were deemed beyond the power of the Central Board if they contradicted clear statutory provisions or policies with statutory character.

4. Relevance of previous judgments and circulars in similar cases:
The learned Single Judge and the Division Bench relied on previous judgments, including Commissioner of Customs, Tuticorin Vs. L.T.Karle & Co. and Karle International Vs. Commissioner of Customs, Bangalore, which held that Circulars cannot override statutory provisions. These judgments clarified that DTA units are eligible for duty drawback even if the manufacturing was done by 100% EOUs, provided the goods were exported. The cited cases by the Appellants/Revenue, such as those from Gujarat, Madhya Pradesh, and Kerala High Courts, were found irrelevant as they did not address the issue of Circulars overriding statutory provisions.

Conclusion:
The High Court dismissed the intra Court appeals filed by the Revenue, upholding the learned Single Judge's view that Circulars cannot override statutory benefits. The Assessee was entitled to DEPB/Duty Drawback benefits as per the Export Import Policy, and any contrary Circulars were invalid. The judgment reinforced the principle that statutory rights cannot be negated by administrative Circulars.