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2012 (10) TMI 652 - HC - CustomsDuty Drawback EOU - appellant is a manufacturer and exporter of ready-made garments - he got the goods manufactured in the second appellant Unit which is 100% EOU Unit by supplying duty paid raw materials to EOU Unit alleged that as the first appellant manufactured goods in EOU Unit and thus exported the goods is he not entitled to Duty Drawback under Section 75 of the Act Held that - Circular 67/98 making it obligatory for DTA to get the goods manufactured in a EOU to necessarily approach the authorities for fixation of Brand Rate Drawback rate. Therefore declaring that he is not entitled to All Industry rate is arbitrary absurd and does not stand to reason drawback cannot be denied
Issues Involved:
1. Entitlement to Duty Drawback for goods manufactured in a 100% Export Oriented Unit (EOU). 2. Applicability of All Industry rate versus Brand Rate Drawback rate for Duty Drawback. 3. Validity of circulars issued by the Department in denying Duty Drawback benefits. Issue-wise Detailed Analysis: 1. Entitlement to Duty Drawback for goods manufactured in a 100% Export Oriented Unit (EOU): The appellants, consisting of a manufacturer-exporter of ready-made garments and a 100% EOU, claimed Duty Drawback for goods manufactured by the EOU. The Revisional authority and the learned Single Judge denied this benefit, stating that the appellants did not fall within the category of 'exporter' eligible for Duty Drawback under Notification No. 67/98-Customs. The High Court analyzed Section 75 of the Customs Act, 1962, which allows Duty Drawback on imported materials used in the manufacture of exported goods, emphasizing that the location of manufacturing (whether in an EOU or otherwise) is immaterial as long as the goods are manufactured in India and exported. 2. Applicability of All Industry rate versus Brand Rate Drawback rate for Duty Drawback: The appellants argued that they were entitled to Duty Drawback at the All Industry rate as prescribed by the Central Government. The Department contended that manufacturers using EOU units must apply for the Brand Rate Drawback rate. The High Court found that under Section 75 and the Customs and Central Excise Duties Drawback Rules, 1995, exporters are entitled to Duty Drawback at the All Industry rate unless they seek a higher Brand Rate Drawback rate. The Court deemed the Department's circulars, which mandated the Brand Rate Drawback rate for goods manufactured in EOUs, as contrary to statutory provisions and arbitrary. 3. Validity of circulars issued by the Department in denying Duty Drawback benefits: The High Court scrutinized Circular No. 74/99 and Circular No. 31/2000, which denied Duty Drawback benefits to goods manufactured in EOUs at the All Industry rate. It held that statutory rights under Section 75 cannot be overridden by departmental circulars. The Court emphasized that the purpose of Duty Drawback is to incentivize exporters and earn foreign exchange for the country. Circulars that contradict this objective and statutory provisions are invalid. The Court also noted a precedent where the Madras High Court granted Duty Drawback benefits under similar circumstances, which had attained finality and should bind the parties. Conclusion: The High Court set aside the orders of the learned Single Judge and the Revisional authority, restoring the order of the Appellate Commissioner, which had allowed the Duty Drawback claims of the appellants. The Court reiterated that exporters are entitled to Duty Drawback at the All Industry rate if they choose not to seek the Brand Rate Drawback rate, and departmental circulars cannot negate this statutory right.
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