2008 (12) TMI 228 - CGOVT - Customs

Drawback - DEPB scheme - Notification No. 21/2002-Cus. dated the 1st March 2002 - Circular No. 57/2004-Cus dated 21-10-2004

Summary

Issues Involved:
1. Eligibility for All Industry Rate Drawback when inputs are imported duty-free under the DEPB scheme.
2. Interpretation of relevant notifications and circulars regarding the Drawback and DEPB schemes.
3. Applicability of the Supreme Court judgment in ITC Ltd. v. CCE.

Detailed Analysis:

1. Eligibility for All Industry Rate Drawback:
The primary issue revolves around the eligibility for All Industry Rate Drawback when inputs are imported duty-free under the DEPB scheme. The respondents, engaged in the manufacture and export of leather goods, imported raw leather and chemicals duty-free under DEPB and other exemption notifications. Their Drawback claims were initially rejected by the Assistant Commissioner (Customs) on the grounds that no duty had been suffered on the inputs.

The Commissioner (Appeals) had concluded that the respondents were eligible for All Industry Rate Drawback as they did not claim DEPB benefits for the exports. However, the applicant Commissioner argued that the Drawback Schedule explicitly excludes goods manufactured from duty-free finished leather imported under Notification No. 21/2002-Cus. from the Drawback Schedule. Additionally, the respondents did not maintain separate records to ascertain the use of imported synthetic tanning material for finishing the leather used in manufacturing.

2. Interpretation of Relevant Notifications and Circulars:
The applicant Commissioner contended that various notifications and circulars, including Notification No. 45/2002-Cus, Notification No. 96/2004-Cus, and Circular No. 41/2005-Cus, among others, provide that no Drawback is admissible if duties on imported inputs are debited from the DEPB book. The notifications and circulars clearly stipulate that specified Drawback rates shall not be applicable to products manufactured or exported by availing any facility under the DEPB Scheme.

The respondents argued that making a debit entry in the DEPB passbook is a mode of duty payment and that their exports were under DBK shipping bills, not DEPB or DEPB-cum-DBK shipping bills. They also cited various circulars to support their claim that no evidence of actual duties suffered on inputs should be insisted upon and that the All Industry Rate Drawback should be granted.

3. Applicability of the Supreme Court Judgment in ITC Ltd. v. CCE:
The applicant Commissioner referenced the Supreme Court judgment in ITC Ltd. v. CCE, which emphasized that the ordinary and natural meaning of words in fiscal statutes should be given effect, and that strict construction should be adhered to unless it leads to absurd results. The Commissioner argued that the respondents' claim for All Industry Rate Drawback was not legal and proper as it involved circumventing the provisions of the DEPB and Drawback schemes.

Conclusion:
The Government carefully examined the submissions, relevant policies, notifications, circulars, and the cited Supreme Court judgment. It concluded that the notifications clearly debar All Industry Rate Drawback if either manufacturing or exports are done by availing any facility under the DEPB Scheme. The Government noted that the respondents were attempting to claim benefits under two different schemes, which is not permissible under the statutes.

Therefore, the Government set aside the Order-in-Appeal and upheld the rejection of the Drawback claims by the Adjudicating Authority. The respondents' claim for All Industry Rate Drawback was found to be not maintainable, and the Revision Application was allowed.

Order:
The impugned Order-in-Appeal is set aside, and the Drawback claim of the party is denied. The Revision Application is allowed.