2013 (6) TMI 435 - HC - Customs

Claim of Duty drawback on goods and packing material perpetually - recovery of duty drawback grated earlier and denial of subsequent claim - export of talcum powder - held that - The departmental authorities may have been influenced by paragraph 11 of the notification dated 1-6-2001 while clearing the petitioners initial drawback claims. The said paragraph, as noted above, permits the manufacturer/exporter to claim the drawback on individual items upon export of the composite article for which no specific rate has been provided in the Table. We are, of course, of the opinion that in the present case, the petitioners cannot be stated to have exported a composite article. What the petitioners exported was the talcum powder simpliciter, of course in packed condition. Had the petitioners exported only the empty bottles without talcum powder, even the Government authorities agree that they would have been entitled to receive the drawback, and that the petitioners on account of claims being disbursed by the Government authorities, would have arranged their affairs financially accordingly and negotiated the terms and rates with the foreign importer on such basis. Insofar as the drawback claims which were already sanctioned and disbursed previously, direction for recovering the same would be highly inequitable, unjust and therefore, should be quashed. Insofar as the claims which are not yet passed, but show cause notice was issued for withholding such claims, the same parameters cannot be applied since from that point onwards, the petitioners could have availed of the opportunities of having the drawback rates fixed if they desired to take the benefit. Decided partly in favor of assessee.

Summary

Issues Involved:
1. Entitlement to duty drawback on packing material.
2. Validity of recovery of previously sanctioned and disbursed drawback claims.
3. Legitimacy of withholding pending drawback claims.

Issue-wise Detailed Analysis:

1. Entitlement to Duty Drawback on Packing Material:
The petitioners, engaged in the manufacture and export of talcum powder, claimed duty drawback on the packing material (HDPE bottles) used for exporting talcum powder. Initially, the customs authorities accepted and disbursed these claims for six consignments but later rejected similar claims for subsequent consignments. The respondents issued a show cause notice stating that "the drawback on packing material is inclusive in the product itself," making the separate drawback claim on packing material inadmissible. The adjudicating authority, Commissioner (Appeals), and the revisional authority upheld this view, concluding that the petitioners should have claimed the drawback on the talcum powder itself, as the rates of drawback specified are inclusive of the packaging material.

2. Validity of Recovery of Previously Sanctioned and Disbursed Drawback Claims:
The petitioners argued that the initial acceptance and disbursement of the drawback claims influenced their financial arrangements and pricing strategies. They contended that it would be harsh to recover the already sanctioned and disbursed claims. The court noted that the customs authorities initially processed and disbursed the claims without objection, which might have influenced the petitioners' decision not to apply for fixation of drawback rates for talcum powder. The court held that recovering these previously sanctioned and disbursed claims would be "highly inequitable, unjust" and quashed the orders directing such recovery.

3. Legitimacy of Withholding Pending Drawback Claims:
For the pending claims, the court noted that the petitioners had the opportunity to apply for the fixation of appropriate drawback rates for talcum powder, which they did not avail. The court held that the same parameters applied to the already disbursed claims could not be applied to the pending claims. The petitioners could have sought the fixation of drawback rates if they desired to benefit from them. Thus, the court did not quash the orders regarding the withholding of pending claims.

Conclusion:
The court quashed the orders directing the recovery of the six previously sanctioned and disbursed drawback claims but upheld the orders withholding the pending claims. The respondents were directed to work out the petitioners' liability as per the judgment and regulate any deposits made during the proceedings, either granting refunds or raising further demands as necessary. The rule was made absolute to the extent of quashing the recovery of previously disbursed claims, with no order as to costs.