2022 (9) TMI 176 - HC - Customs

Duty Drawback - Validity of Policy Circular No.9(RE-2013)/2009-14 dated 30.10.2013 - DTA converted to 100% EOU - whether the petitioner is entitled to duty drawback, confined to customs duty component, against deemed exports, even where it has claimed cenvat credit? - HELD THAT - It is apparent that the AIR duty drawback schedule published by the DOR is, inter alia, available concerning the goods in issue i.e., Sulphamethoxazole - Clearly, what emerges is that the schedule has two columns i.e., Column A and Column B, apart from columns concerning tariff items, description of goods and unit of measure. The two columns i.e., A and B represent two eventualities - First, the rate at which drawback is available when the cenvat facility has not been availed. Second, the rate at which drawback is available when the cenvat facility has been availed. Insofar the goods in issue are concerned, (i.e., Sulphamethoxazole) the rate at which the duty drawback is available in both situations i.e., when cenvat facility has not been availed and when cenvat facility has been availed, is the same. Whether rate of duty drawback given in column B; which envisages a situation where cenvat credit has been availed of, concerns only the customs duty component? - HELD THAT - The answer to this conundrum is found in the notes and conditions appended to notification no.92/2012-Customs (N.T.) dated 04.10.2012 and notification no.98/2013-Customs (N.T.) dated 14.09.2013. Although the 04.10.2012 notification was superseded by the 14.09.2013 notification as the Central Government, it appears, carried out a fresh determination of rates of drawback, the notes and conditions more or less remained the same. Since AIR for duty drawback in respect of the goods in issue is available and the rate stipulated in columns A and B of the schedule is the same, the condition stipulated in the 2013 Circular, that duty drawback on customs duty would be available only upon fixation of brand rate, which, in turn, is based on actual duty- paid documents, cannot apply to the petitioner. The said condition contained in the 2013 Circular is otiose insofar as the petitioner is concerned. The petitioner is right, that the restriction against the claim of concession in duties and taxes applied only vis- -vis plant, machinery and equipment that had already been installed. Thus, the fact that the petitioner was allowed to carry forward the advance authorization to the converted unit i.e., 100% EOU and thereafter fulfil the outstanding export commitment would, in our view, as correctly argued on behalf of the petitioner, furnish a clue that duty drawback for such goods should extend qua unutilized goods, which were available at the time of conversion of the DTA unit into a 100% EOU. It is thus concluded that - (i) The petitioner is not required to have a brand rate of duty drawback fixed, based on actual duty-paid documents for the return of basic customs duty. To that extent, the 2013 Circular is read down. (ii) Since the impugned order dated 26.04.2016 is based on the 2013 Circular, in particular, the part which we have read down, the same cannot be sustained and is, hence, set aside. (iii) Consequentially, the order dated 17.11.2016 will also stand quashed. Petition disposed off.

Summary

Issues Involved:
1. Entitlement to duty drawback on customs duty component against deemed exports where cenvat credit is claimed.
2. Requirement to furnish evidence of actual duty suffered on imported or indigenous inputs for claiming duty drawback based on All Industry Rates (AIR).
3. Validity of Policy Circular No.9(RE-2013)/2009-14 dated 30.10.2013.
4. Legality of orders dated 26.04.2016 and 17.11.2016 by Deputy Development Commissioner and Deputy Director General of Foreign Trade.

Issue-wise Detailed Analysis:

1. Entitlement to Duty Drawback on Customs Duty Component:
The petitioner, a manufacturer and exporter of pharmaceutical products, converted its Domestic Tariff Area (DTA) unit into a 100% Export Oriented Unit (EOU) on 28.09.2012. Post-conversion, the petitioner claimed duty drawback on the customs duty component for deemed exports. The central issue was whether the petitioner was entitled to this duty drawback despite having claimed cenvat credit. It was established that deemed exports, including supplies from DTA to EOU, are eligible for duty drawback under the Foreign Trade Policy (FTP) 2009-2014, provided the goods are manufactured in India.

2. Requirement to Furnish Evidence of Actual Duty Suffered:
The petitioner argued that it was entitled to claim duty drawback based on AIR without furnishing evidence of actual duty suffered on inputs. The court noted that the FTP and Handbook of Procedures (HBP) allow for duty drawback on customs duty paid on inputs/components even if cenvat credit is availed. The court found that the All Industry Rate (AIR) for duty drawback is available for the goods in question, and the rate is the same whether cenvat credit is availed or not, indicating that the customs duty component can be claimed without additional documentation.

3. Validity of Policy Circular No.9(RE-2013)/2009-14:
The 2013 Circular required the fixation of a brand rate based on actual duty-paid documents for claiming duty drawback on the customs duty component. The court held that this requirement was beyond the provisions of the FTP and HBP, which do not mandate such documentation when AIR is available. Therefore, the court read down the 2013 Circular to the extent that it imposed this additional requirement.

4. Legality of Orders Dated 26.04.2016 and 17.11.2016:
The orders dated 26.04.2016 and 17.11.2016, which rejected the petitioner's claims based on the 2013 Circular, were found unsustainable in law. The court quashed these orders, stating that they were based on an incorrect interpretation of the FTP and HBP. The court emphasized that duty drawback on the customs duty component should be granted based on AIR without requiring proof of actual duty suffered.

Conclusion:
The court concluded that the petitioner is entitled to duty drawback on the customs duty component based on AIR without the need for brand rate fixation or additional documentation. The 2013 Circular was read down, and the impugned orders dated 26.04.2016 and 17.11.2016 were set aside. The writ petition was disposed of accordingly, with each party bearing its own costs.