2023 (7) TMI 1073 - HC - Customs

Drawback claim on account of utilization of goods procured from DTA as per Rule 34 of Special Economic Zone Rules, 2006 - Same entity of different entity. According to the respondent writ petitioner, Kariwala Green Bags procured goods from the domestic tariff area. According to the authorities, Kariwala and Kariwala Green Bags were different entities. Foreign exchange was received on export of the goods by Kariwala and not Kariwala Green Bags. The appellants point of view is that to get the benefit of drawback the exporter, importer and the recipient of the foreign exchange have to be one entity. HELD THAT - The scope of interference of the writ court whether in its original or appellate jurisdiction with factual findings in a decision is extremely limited. It can interfere if the authority has failed to exercise its jurisdiction or has exceeded its jurisdiction. If there is violation of the principles of natural justice, the court can interfere. If there is an error of law apparent in the order, it vitiates it. The court will not re-examine facts or evidence. It cannot substitute its views with that of the court or authority below. If the finding on facts is plausible, the court will not interfere. If the findings on facts are so glaringly and grossly erroneous or so perverse, unreasonable and unconscionable that no prudent person could have arrived at them, the court can interfere. Short of this, the court has very little powers of probing into an impugned order. On each and every point in issue, the learned judge has come to a plausible finding in support of the respondent s entitlement to its duty drawback claim - there are no reason to interfere with it. The appeal is accordingly dismissed.

Summary

Issues involved:
The core dispute in this case revolves around the entitlement of duty drawback claim by a company operating in a Special Economic Zone. The issues include the interpretation of Special Economic Zone Rules, 2006, the relationship between different entities within the same organization, compliance with Customs Act, 1962, and the treatment of export proceeds in foreign currency.

Interpretation of Special Economic Zone Rules, 2006:
The case involved a dispute regarding the duty drawback claim of a company, Kariwala Green Bags, operating in a Special Economic Zone. The company procured raw materials from the domestic tariff area, manufactured goods within the zone, and exported them. The authorities contended that Kariwala Green Bags and Kariwala Industries Ltd. were separate entities, leading to the rejection of the duty drawback claim. However, the Commissioner of Customs (Appeals) overturned this decision, emphasizing that Kariwala Green Bags was a unit of Kariwala Industries Ltd. and not a separate entity. The Commissioner set aside the lower authority's findings of rule violations and directed the sanction of the duty drawback.

Relationship between entities within the same organization:
The High Court analyzed the relationship between Kariwala Green Bags and Kariwala Industries Ltd. The court noted that Kariwala Green Bags was a division of Kariwala Industries Ltd., as evidenced by the Letter of Permission issued by the Development Commissioner. The court highlighted that the duty drawback scheme allowed for the transfer of goods between divisions for manufacture. It was observed that although the raw materials were not paid from a foreign currency account, Kariwala Green Bags used foreign currency derived from export proceeds through the export zone, substantially complying with the rules.

Compliance with Customs Act, 1962 and treatment of export proceeds:
The dispute also involved the compliance with the Customs Act, 1962, particularly regarding the treatment of export proceeds in foreign currency. The authorities argued that the duty drawback claim was not valid due to alleged mis-declaration and violations of SEZ Rules. However, the High Court found that Kariwala Green Bags had procured duty-paid raw materials from the domestic tariff area, manufactured goods within the zone, and exported them, realizing export proceeds in foreign currency. The court held that the payment for goods procured in foreign currency from the current account, to which the export proceeds were credited, substantially complied with the rules, justifying the duty drawback claim.

Conclusion:
The High Court dismissed the appeal filed by the Commissioner of Customs, affirming the judgment that supported the duty drawback claim of Kariwala Green Bags. The court emphasized the limited scope of interference with factual findings and concluded that the judgment under appeal was well reasoned and supported by plausible findings. The duty drawback claim was upheld, directing the concerned authorities to grant the claim within a specified timeframe.