2012 (8) TMI 898 - CGOVT - Customs

Duty drawback claim - imported raw leather was fully exempted from duty vide Notification No. 21/2002-Cus., dated 1-3-2002 - While rejecting the drawback claims, the original authority had held that in terms of Notification No. 26/2003-Cus. (N.T.), dated 1-3-2003, Notification No. 8/2005-Cus. (N.T.), dated 18-1-2005 and Notification No. 36/2005-Cus. (N.T.), dated 2-5-2005, the rates of drawback shall not be applicable to export of a commodity or product if such commodity or product is manufactured by availing of facility under DEPB Scheme as contained in para 4.3 and para 4.3.5 of Exim Policy 2002-07 and para 4.3 and para 4.3.5 of Exim Policy 2004-09 - Held that - Circular No. 24/2001-Cus., dated 20-4-2001 and Circular No. 19/2005-Cus., dated 21-3-2005, clarify that All Industry Rate (AIR) of duty drawback are based on the concept of averages, where the drawback rates are based on average incidence of duties suffered on inputs and has no relationship to the actual input consumption matters or actual duty incidence suffered on inputs. Government finds that in this case these circulars are not relevant since the ground for rejection of drawback claim is as explained in para 8 above. However, Government finds no merit in contention of department that since, the applicant has not suffered any duties on their inputs, they are not eligible for Drawback claim. Here, Government is in agreement with the observation of Commissioner (Appeals) in this specific issue that AIR of Drawback cannot be denied/reduced by field formation as the same is fixed by Central Government taking into account all the relevant factors as stated in above said circulars. Circular No. 3/99-Cus., dated 3-2-1999 where in it has been clarified that drawback is admissible only against cash payment of duties and debit of duties against DEPB scrip on import of goods is in effect availment of exemption of duty and therefore no drawback is admissible when duty is paid on inputs by debit of DEPB Scrip. Department has also contested that Circular No. 41/2005-Cus., dated 28-10-2005 provides that additional customs duty paid through debit under DEPB shall also be allowed as brand rate of drawback and no clarification has been given in respect of AIR. Since, the respondents are claiming drawback of duty at AIR this circular is not applicable to this case. - Drawback benefit is not permissible in this case since export goods have been manufactured by availing facility of DEPB Scheme. Since the applicant is not entitled for drawback claim there is not question of allowing instant interest claim. Therefore, Government sets aside both the impugned Orders-in-Appeal, dated 5-12-2008 and 21-3-2006 - Decided in favour of Revenue.

Issues Involved:

1. Eligibility for Drawback Claims
2. Applicability of DEPB Scheme
3. Interpretation of Circulars and Notifications
4. Interest on Drawback Claims

Detailed Analysis:

1. Eligibility for Drawback Claims:

The primary issue revolves around the eligibility of the respondent for drawback claims on exports of finished leather products. The department contended that since the raw leather was imported duty-free under Notification No. 21/2002-Cus., and chemicals were imported using the DEPB Scheme, the respondent was not entitled to the claimed drawback. The original authority rejected the drawback claims based on Notification Nos. 26/2003-Cus. (N.T.), 8/2005-Cus. (N.T.), and 36/2005-Cus. (N.T.), which stipulate that drawback rates are not applicable if the products are manufactured using the DEPB Scheme. The Commissioner (Appeals) allowed the drawback claims, but the department challenged this decision, leading to the revision applications.

2. Applicability of DEPB Scheme:

The respondent utilized the DEPB Scheme for importing chemicals used in manufacturing the export goods. The department argued that the debit of DEPB scrip cannot be treated as payment of duty, thus making the respondent ineligible for the drawback. The Commissioner (Appeals) observed that the provisions relied upon by the department do not explicitly prohibit drawback when materials are imported under the DEPB Scheme. However, the Government noted that the relevant notifications clearly state that drawback at All Industry Rate (AIR) is not applicable when DEPB benefits are availed for manufacturing export goods.

3. Interpretation of Circulars and Notifications:

The Commissioner (Appeals) relied on several circulars, including Circular No. 24/2001-Cus., Circular No. 19/2005-Cus., and Circular No. 57/2004-Cus., to support the respondent's claims. The Government, however, found these circulars irrelevant to the case as they do not address the specific issue of drawback eligibility when DEPB benefits are availed. The Government emphasized that the statutory provisions in the notifications must be given their ordinary meaning, as held by the Supreme Court in the case of M/s. ITC Ltd. v. CCE, Delhi.

4. Interest on Drawback Claims:

The respondent also claimed interest on the sanctioned drawback amount, which was initially denied by the original authority. The Commissioner (Appeals) directed the department to pay interest, but the department challenged this order as well. Since the Government concluded that the respondent is not entitled to the drawback claims, the issue of interest becomes moot.

Conclusion:

The Government upheld the department's contention that the respondent is not eligible for the claimed drawback as the export goods were manufactured using the DEPB Scheme. The orders of the Commissioner (Appeals) were set aside, and the revision applications were allowed. The Government emphasized the importance of adhering to the ordinary and natural meaning of statutory provisions and clarified that the relevant circulars do not override the specific conditions of the notifications.

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