2013 (3) TMI 241 - CGOVT - Customs

Duty drawback - recovery of erroneously sanctioned drawback claim - It was noticed after audit of export documents i.e. the exported item of woollen garments were not covered by the duty drawback schedule for the year 1999-2000 and that as per schedule woollen garment namely suits/blazers/trousers and jackets excluding those made from shoddy fabric/yarn only are classifiable under sub-serial No. 62.09 and eligible for drawback and required the department to recover the amount paid as drawback. - Hence demand notice was issued Held that - the case laws cited by respondent are of no help to him. The respondent has also contended that the demand was issued under Section 28 of Customs Act, 1962 and therefore subject to time limitation prescribed under this Act. In this regard. Government notes that the adjudicating authority has ordered recovery of erroneously paid drawback under Rule 16 of Drawback Rules where no time limit is prescribed. Respondent has wrongly stated that demand was issued under Section 28 of Customs Act, 1962. - Decided in favor of revenue.

Summary

Issues:
Classification of exported goods for duty drawback under the Drawback Schedule 1999-2000, applicability of Circular No. 55/99 dated 25-8-1999, retrospective effect of clarificatory notifications, recovery of erroneously paid drawback under Rule 16 of Drawback Rules, time limitation for recovery under Customs Act, 1962.

Analysis:

1. Classification of Exported Goods:
The case involved the classification of exported woven woollen ladies vests for duty drawback under the Drawback Schedule 1999-2000. The respondent claimed drawback under sub-serial No. 62.01, but it was found that the exported items did not fall under this sub-heading. The Commissioner of Customs (Appeals) allowed the appeal, holding that the goods were classifiable under sub-serial No. 62.01. However, the Central Government observed that since the exported items did not fall under sub-serial No. 62.09 covering specified woollen garments, they were not eligible for the All Industry Drawback Rate. Consequently, the impugned order-in-original was restored.

2. Applicability of Circular No. 55/99:
The Circular No. 55/99 dated 25-8-1999 clarified that sub-serial No. 62.01 of the Drawback Table was not applicable to woollen readymade garments. It further stated that woollen garments other than those specified under sub-serial No. 62.09 could only claim Brand Rate. The Central Government noted that this circular was issued for guidance and did not effect any change in the drawback schedule. The respondent argued that the circular could not be given retrospective effect, but the Government cited a Karnataka High Court judgment stating that clarificatory notifications are retrospective in nature.

3. Recovery of Erroneously Paid Drawback:
The adjudicating authority held that the exported woollen garments were not covered in the drawback schedule 1999-2000 and ordered the recovery of erroneously paid drawback under Rule 16 of Drawback Rules. The respondent contended that there was no error at the time of sanctioning the drawback claim and that recovery could not be based on a subsequent circular. However, the Government clarified that the authority's decision was based on the merit of the case and not solely on the circular. It was also noted that the demand was not issued under Section 28 of the Customs Act, 1962, as claimed by the respondent.

4. Time Limitation for Recovery:
The respondent argued that the demand was time-barred as it was issued beyond the limitation period prescribed under the Customs Act, 1962. However, the Government pointed out that the demand for recovery was made under Rule 16 of Drawback Rules, which does not prescribe a time limit. Therefore, the contention regarding the time limitation under the Customs Act was deemed incorrect.

In conclusion, the Central Government set aside the order passed by the Commissioner (Appeals) and restored the impugned order-in-original, finding in favor of the department in the revision application.