1980 (5) TMI 45 - HC - Customs

Issues Involved:
1. Claim for drawback under Customs and Central Excise Drawback Rules, 1971.
2. Applicability of Rule 3 and Rule 7 of the 1971 Rules.
3. Classification of goods under sub-serial numbers 25.01 and 25.02.
4. Discretion of the Central Government under Section 75 of the Customs Act.
5. Calculation and eligibility for drawback rates.

Issue-wise Detailed Analysis:

1. Claim for drawback under Customs and Central Excise Drawback Rules, 1971:
The petitioner, a public limited company engaged in the manufacture of polyester staple fibre, claimed a drawback of Rs. 7,15,779.60 for the customs duty paid on the import of Dimethyl Terephthalate (DMT). The claim was made under the 1971 Rules but was rejected by the respondents (Union of India, Ministry of Finance) via a letter dated 12-4-1978. The petitioner argued that their case fell under the 1971 Rules, specifically under Rule 3, which allows for a drawback on the export of goods specified in the Schedule at determined rates.

2. Applicability of Rule 3 and Rule 7 of the 1971 Rules:
Rule 3 provides for a drawback on exported goods at rates determined by the Central Government, considering various factors like duty paid on imported materials. The petitioner contended that their case should be considered under sub-serial No. 25.01 for a special brand rate. However, the respondents argued that the goods fall under sub-serial No. 25.02, which already has a fixed rate of Rs. 43.15 per kg for polyester fibre content. Rule 7 allows for a special rate if the determined rate is less than three-fourths of the duties paid. The petitioner was found ineligible under Rule 7 as the total duties paid (including customs duty on DMT) did not exceed three-fourths of the fixed rate.

3. Classification of goods under sub-serial numbers 25.01 and 25.02:
The petitioner's goods were classified under sub-serial No. 25.02, which pertains to yarn of specific counts spun from polyester fibre, among others. The petitioner argued for classification under sub-serial No. 25.01, which allows for a brand rate to be fixed on an application from the manufacturer/exporter. The court found that sub-serial No. 25.01 applies only if the goods are not specified elsewhere. Since the petitioner's yarn matched the description under 25.02, they could not seek a special brand rate under 25.01.

4. Discretion of the Central Government under Section 75 of the Customs Act:
Section 75 of the Customs Act grants the Central Government discretion to allow a drawback on imported materials used in the manufacture of exported goods. The petitioner argued that it was mandatory for the government to provide for a drawback on all imported materials. The court held that the Central Government's discretion is unfettered, and it is not compelled to provide a drawback for all imported materials. The government can choose to provide drawbacks for certain classes of goods and not others, based on public interest and economic considerations.

5. Calculation and eligibility for drawback rates:
The court examined the calculation of the drawback rate and found that the Central Government had considered the relevant factors under Rule 3(2) while fixing the rate of Rs. 43.15 per kg for polyester fibre content. The petitioner's argument that the rate did not account for customs duty on imported DMT was rejected. The court noted that since DMT was available indigenously, the government did not consider it necessary to include customs duty on imported DMT in the drawback rate. The petitioner was also found ineligible under Rule 7, as the total duties paid did not exceed three-fourths of the fixed rate.

Conclusion:
The court dismissed the petition, concluding that the petitioner's claim for a special brand rate under sub-serial No. 25.01 was unfounded, and the fixed rate under sub-serial No. 25.02 was appropriately determined. The Central Government's discretion under Section 75 was upheld, and the petitioner's ineligibility under Rule 7 was affirmed. Both judges agreed that the petitions deserved to be dismissed with costs.

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