2003 (1) TMI 195 - AT - Customs

Issues Involved:
1. Eligibility for duty drawback on exports by 100% Export Oriented Units (EOUs).
2. Interpretation of Customs and Central Excise Duties Drawback Rules, 1995.
3. Applicability of Government of India Notifications No. 67/98-Cus. (N.T.) and 31/99-Cus. (N.T.).
4. Role of the manufacturer and exporter in the context of job work.
5. Limitation period for recovery of duty drawback.

Issue 1: Eligibility for Duty Drawback on Exports by 100% Export Oriented Units (EOUs)

The officers of Headquarters Customs (Preventive) gathered intelligence indicating that M/s. Leela Scottish Lace Ltd. (LSLL) was irregularly availing the facility of duty drawback for ready-made garments manufactured on a job work basis by EOUs, namely M/s. Tropicate Textile Ltd. (TTL) and M/s. Sara International Inc. (SII). The EOUs had obtained permission to undertake job work within their bonded premises for LSLL. The ready-made garments were removed from the bonded premises directly to Bangalore Air Cargo Complex under 'transhipment shipping bills' and exported by LSLL, which then claimed duty drawback at the rates specified in Notifications No. 67/98-Cus. (N.T.) and 31/99-Cus. (N.T.). However, a Show Cause Notice was issued to LSLL, questioning the eligibility of such duty drawback claims based on the provisions of the aforementioned notifications.

Issue 2: Interpretation of Customs and Central Excise Duties Drawback Rules, 1995

The Commissioner, after hearing the appellants, found that the goods manufactured by EOUs out of materials supplied by LSLL were removed directly from their premises to Bangalore Air Cargo Custom shed, from where they were exported. LSLL filed shipping bills for duty drawback claims based on their invoice, and the drawback was claimed at the 'All Industry Rate' applicable to sub-entry 6201 of the Table to Notification No. 67/98-Cus. (N.T.). The Commissioner concluded that LSLL was not eligible for the claimed duty drawback, as the goods were manufactured in bonded warehouses under Section 65 of the Customs Act, 1962, and thus fell under the exclusion clauses of the notifications.

Issue 3: Applicability of Government of India Notifications No. 67/98-Cus. (N.T.) and 31/99-Cus. (N.T.)

The Commissioner cited General Notes to the notifications, which specified that the rates of drawback were not applicable to goods manufactured wholly or partly in a warehouse under Section 65 of the Customs Act, or by a 100% EOU. The Commissioner interpreted that the goods manufactured by EOUs for LSLL were ineligible for the duty drawback claimed under the notifications. However, upon appeal, it was found that the goods were not manufactured from imported goods deposited under Section 60 or received under Section 67 of the Customs Act, but from raw materials supplied by LSLL. Therefore, the fabrication activity did not fall under Section 65, and the exclusion clauses of the notifications did not apply.

Issue 4: Role of the Manufacturer and Exporter in the Context of Job Work

The appellate tribunal found that the raw material supplier, LSLL, should be considered the manufacturer of the ready-made garments, as per Rule 4(3) of the Central Excise Rules, 2002. The tribunal concluded that LSLL was the owner and exporter of the garments, as the goods were removed from EOUs on transshipment shipping bills and the proper officers allowed LSLL to file shipping bills for duty drawback claims. The tribunal also referred to the minutes of a meeting held by the Commissioner, Bangalore, which confirmed that the owner of the goods (LSLL) should file the shipping bill and be eligible for the benefits of export.

Issue 5: Limitation Period for Recovery of Duty Drawback

The Commissioner rejected the plea of limitation raised by LSLL, stating that the demand for recovering the erroneous payment of drawback was issued under Section 75A(2) of the Customs Act, 1962, read with Rule 16 of the Customs and Central Excise Duties Drawback Rules, 1995. However, the appellate tribunal found that the proper officers at Bangalore Air Cargo had allowed LSLL to file shipping bills and granted the drawbacks, thereby supporting LSLL's plea of limitation and determining that LSLL was the rightful owner and exporter of the garments.

Conclusion:

The appellate tribunal set aside the impugned order, concluding that LSLL was eligible for the duty drawback claimed. The tribunal found that the goods were not manufactured in a warehouse under Section 65, nor were they manufactured and/or exported by an EOU under the exclusion clauses of the notifications. The tribunal allowed the appeal with consequential benefits, if any, and ordered the examination and processing of pending claims.

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