2006 (8) TMI 208 - HC - Customs

Duty Drawback - Interpretation of provisions - duties due on imported merchandise - whether the findings of the Tribunal in equating the Circulars permitting Brand Rate of Drawback with the claim for All Industry Duty Drawback is correct in law - HELD THAT - It is not the case of the appellant that the first respondent, a DTA unit, is not entitled for the duty drawback u/s 75 of the Act on the imported materials used in the manufacture of the goods, which are exported. But the appellant refused the duty drawback to the first respondent, a DTA unit. Brand Rate of Drawback arises only in the case where no amount or rate of drawback has been determined in respect of any goods and in the case where any manufacturer-exporter or exporter of such goods or the supporting manufacturer apply to the Commissioner in writing for determination of the amount or rate of drawback thereof stating all the relevant facts as provided under Rule 6 of the Rules. But, in the instant case, such contingency does not arise at all nor the Tribunal had dealt with the Brand Rate Drawback, because for the raw materials or inputs in question, the Central Government has specified the amount/ rate of drawback by issuing necessary notifications under Rule 3 read with Rule 4 of the Rules. Therefore, the first question does not arise for our consideration at all and it is answered accordingly. Whether the Tribunal is correct in law in overlooking the facts that the goods have been manufactured in 100% EOU and that the exporter has mis-declared such fact in the Shipping Bill ? - We hold that question of mis-declaration in column 7 of the shipping bills by the first respondent does not arise and the duty drawback sanctioned to the first respondent, a DTA unit, as per Rule 3 read with Rule 4 of the Rules and the notification and the circulars issued therein cannot, therefore, be denied on the ground that the finished goods were manufactured in the 100% EOU. Hence, the second issue is answered in favour of the assessee. Whether the Tribunal is correct in law in ignoring the fact that the required permission from the Assistant Commissioner in charge of the 100% EOU was not obtained by the exporter? - In view of the circular issued in clarification to clause 2 (c) of the notification which was issued in accordance with Rule 3 read with Rule 4 of the Rules, the question of getting permission from the authorities concerned does not arise at all and in any event, when Section 75(3) of the Act provides that the power to make rules conferred by sub-section (2) shall include the power to give drawback with retrospective effect, the refusal to give due weightage to the permission obtained by the first respondent in July 1999, even though it is post-period permission, cannot be appreciated, as such permission has to be considered not only to advance but also to achieve the object of the purpose and intention of Section 75 of the Act, viz., sanctioning the duty drawback suffered by the first respondent on the materials/inputs imported and used in the manufacture of finished goods, which are exported and not to defeat the same. Hence, we answer the last question of law also in favour of the assessee. Accordingly, the appeal is dismissed answering the questions of law raised in the affirmative, in favour of the assessee and against the Revenue.

Issues Involved:
1. Equating Brand Rate of Drawback with All Industry Duty Drawback.
2. Mis-declaration of goods manufactured in a 100% Export Oriented Unit (EOU) in the Shipping Bill.
3. Non-obtaining of required permission from the Assistant Commissioner in charge of the 100% EOU.

Detailed Analysis:

I. Equating Brand Rate of Drawback with All Industry Duty Drawback:

The first issue concerns whether the Tribunal was correct in equating the Circulars permitting Brand Rate of Drawback with the claim for All Industry Duty Drawback. The court clarified that Brand Rate of Drawback arises only when no amount or rate of drawback has been determined for any goods, and a manufacturer-exporter or exporter applies to the Commissioner for determination of the amount or rate of drawback. In this case, such contingency did not arise as the Central Government had already specified the amount/rate of drawback for the raw materials or inputs in question through necessary notifications under Rule 3 read with Rule 4 of the Rules. Therefore, the first question was deemed not applicable and was answered accordingly.

II. Mis-declaration of Goods Manufactured in a 100% EOU:

The second issue was whether the Tribunal overlooked the fact that the goods were manufactured in a 100% EOU and that the exporter mis-declared this fact in the Shipping Bill. The court found no such column in the shipping bills requiring the first respondent to indicate that the goods were manufactured by a 100% EOU. It was held that, in the absence of any statutory requirement, there was no mandatory obligation for the first respondent to mention that the goods were manufactured in a 100% EOU. The court emphasized that fiscal statutes should be strictly construed and harmoniously interpreted to give effect to their purpose. The court also noted that the Circular No. 31 of 2000 clarified that DTA units could utilize the idle capacity of EOU/EPZ units and were eligible for duty drawback against duties suffered on their inputs processed by EOU/EPZ units for manufacturing goods exported directly from the 100% EOUs. Therefore, the court concluded that the question of mis-declaration did not arise, and the duty drawback sanctioned to the first respondent could not be denied on the ground that the finished goods were manufactured in the 100% EOU.

III. Non-obtaining of Required Permission:

The third issue was whether the Tribunal ignored the fact that the required permission from the Assistant Commissioner in charge of the 100% EOU was not obtained by the exporter. The court referred to the circular dated 14-9-98, which clarified that the question of obtaining permission from the authorities did not arise. Additionally, Section 75(3) of the Act allows for the power to give drawback with retrospective effect. The court held that the post-period permission obtained by the first respondent in July 1999 should be considered to advance and achieve the object of Section 75 of the Act, which is to sanction the duty drawback suffered by the first respondent on the imported materials/inputs used in the manufacture of finished goods that were exported. Therefore, the third issue was also resolved in favor of the assessee.

Conclusion:

The appeal was dismissed, with the court answering the questions of law in the affirmative, in favor of the assessee, and against the Revenue. No costs were awarded.

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