2024 (11) TMI 413 - AT - Customs

Fixation of brand rates of DBK by the appropriate authority - Rejection of applications for fixation of brand rate of duty drawback for the drawback of duties suffered on inputs used in the exports made - reasons inter alia that they had not furnished proof of duty paid inputs declared in DBK III and IIIA statements, they had calculated the yarn consumption for a particular export based on SION which is nothing but a mere arithmetical reverse calculation and not the actual quantity of duty, paid inputs, etc. - whether the direction of the Original Authority in directing the fixation of brand rates of drawback is in order? HELD THAT - Drawback which is rebate of duty paid on excisable goods used in the manufacturer of export fabrics, term used refers to the actual quantity of goods used in the manufacture. The justification for this method adopted by the respondent has also been reproduced at para 15.03 and thereafter, the Original Authority observes that there was sufficient force in the contentions of the assessee since the exporter cannot manufacture exact quantity of fabric required for export under a particular consignment and that the export items are always subject to rigorous quality test and inspection. We find that the incidence of duty suffered at the input stage, in the absence of Modvat/deemed credit benefits should be rebated by way of drawback; when the exact quantity of yarn consumed out of the purchased quantity could not be ascertained under circumstances, like the one in the case on hand, there has to be a methodology to be adopted, it could be SION norms or any other input output norms as available in textile parlance. SION being an established norms prescribed even by DGFT for the purpose of export import commerce which is recognized in law, there is no infirmity in applying the same norms in the case on hand. There is a finding in the impugned order that the drawback eligibility is calculated after accounting for the duty involved on the production wastage at 4% and finally the eligible amount of drawback is arrived at against the FOB value and therefore there was no infirmity in adopting the SION norms for the reasons that the main purpose underlying the drawback scheme is rebate of duty paid on excisable goods used in the exported products. We do not find any counter based on record to the above findings in the order and nor do we find any assertion by the revenue as to either the non-usage of materials in the manufacture of Denim and the non-export of its manufactured products. There is no denial of the fact that the eligible brand rate is calculated based on the quantity of fabrics exported and the consumption of yarn relevant to a specific quantity of fabrics exported is arrived by reverse calculation method based on the input output norms as envisaged in the SION and the calculation so made for fixing the brand rate of due drawback appears to have been certified by the field officers, and the claim was submitted after verification to the Drawback Directorate, New Delhi, as appearing in impure order. Moreover, we find that the method adopted by the receipt, respondent appears to be consistent, which fact has also not been disputed by the Revenue. Allegation of reverse calculation alleged by the Revenue - As we find that the input output ratio is prescribed by the SION, which is also recognized under law and hence the mode of calculation adopted by the respondent cannot be rejected. It is not the case as though said method was adopted deliberately, rather the respondent has explained the circumstances which prompted them to adopt the said method not only for the year under consideration but also for the earlier years, which has been accepted by the revenue. This apart, there is no allegation by the revenue that there was any statutory violation by the respondent, other than following the SION norms We find that there has been no effort at all made by the Revenue to negate the above findings of the Appellate Authority in any manner and hence, we are of the clear opinion that the impugned order deserves to be upheld since it is a well-reasoned order.

Summary

Issues:
1. Whether the direction of the Original Authority in directing the fixation of brand rates of drawback is in order?

Analysis:
The case involved an assessee engaged in the manufacture and export of cotton denim fabrics, availing the facilities of both brand rate of duty drawback scheme and DEPB scheme. The Commissioner issued a show cause notice to reject the application for brand rate of duty drawback due to alleged deficiencies in providing proof of duty paid inputs and calculating yarn consumption based on SION. The assessee filed a detailed reply justifying their claim, leading to the Commissioner directing the fixation of brand rates of duty drawback. The revenue appealed, arguing that the assessee failed to prove statutory requirements and the Original Authority did not consider the law's requirements. The respondent contended that the applications were complete, citing Rule 2(a) of DBK Rules 1995 and the practical difficulties in determining exact input consumption. The Tribunal had to decide whether the direction of the Original Authority was appropriate.

Upon careful consideration of arguments and documents, the Tribunal found that the Revenue insisted on actual input quantity determination, while the assessee used an arithmetical calculation based on SION. The Original Authority noted that the applications included necessary documents, but the gross quantity was calculated based on SION norms, not actual basis. The Tribunal agreed with the assessee's method, citing the difficulty in determining exact input consumption and the established SION norms recognized by law. The Tribunal found no infirmity in adopting SION norms for calculating drawback eligibility, as the scheme aims to rebate duty on excisable goods used in exports. The Tribunal also noted the consistency in the method adopted by the respondent, certified by field officers and the Drawback Directorate.

The Tribunal dismissed the Revenue's allegation of reverse calculation, as the SION-prescribed input-output ratio was lawful. The Tribunal highlighted the lack of effort by the Revenue to dispute findings supporting the respondent's method. The Tribunal upheld the impugned order, considering it well-reasoned and found no merit in the Revenue's appeal. Consequently, the appeal was dismissed, affirming the Commissioner's order for the fixation of brand rates of duty drawback.