2014 (1) TMI 1526 - HC - Customs

Duty Drawback - restriction to allow Cenvat Credit - Merchant exporter - readymade garments purchased from the open market - Circular No. 54/2001-Cus dated 19.10.2001 and Circular No.16/2009-Cus dated 25.05.2009 - Whether the demand is to be sustained in view of para(iv) of Circular 17/97-Cus. and para (vi) of Circular 64/98 though these are not relied upon in SCN - Held that - We are not inclined to confirm such huge liability for past periods based on Circulars which were in the knowledge of the department and which were not implemented. We would like to rely more on the legal provisions. The only legal provision relied upon is Rule 3 of the drawback Rules. We agree with the interpretation to this Rule given by the Board in Circular 16/2009-Cus. The argument that this interpretation is applicable from date of issue of Circular 16/2009-Cus. Is repugnant to logic because the Rule has remained the same except for amendment on 13-7-2006, to take care of incidence and rebate of Service Tax - Following decision of COMMISSIONER OF CUSTOMS (EXPORT) Versus KULTAR EXPORT 2012 (10) TMI 79 - DELHI HIGH COURT - order, disallowing Central Excise portion of the drawback, in terms of the adjudicating authority and revisional order is hereby set aside - Decided in favour of assessee.

Summary

Issues:
1. Quashing of order by Joint Secretary, Department of Revenue.
2. Interpretation of Circulars for duty offsetting.
3. Compliance with conditions for duty offsetting.
4. Prospective application of Circular 16/2009-Cus.
5. Comparison with previous court decision on duty offsetting for merchant exporters.

Analysis:
1. The petitioners sought to quash an order by the Joint Secretary, Department of Revenue, dated 13.08.2012. They were merchant exporters of readymade garments and relied on Circulars 54/2001-Cus and 16/2009-Cus for duty offsetting. However, their contentions were rejected in assessment proceedings, leading to the petition for setting aside the order.

2. The respondents argued that the impugned order did not warrant interference. They highlighted that duty offsetting was subject to specific conditions as per Circular 16/2009-Cus, which the petitioners allegedly did not fulfill. The respondents also emphasized that the Circular had prospective application and presented an investigation report questioning the duty payment on inputs.

3. The petitioners referenced a previous court decision in Commissioner of Customs (Export) v. Kultar Export, where the court affirmed duty offsetting for merchant exporters. The court in the previous case had analyzed various Circulars, including 54/2001-Cus and 16/2009-Cus, and ruled in favor of the merchant exporter. Drawing parallels, the current court held that the petitioners were entitled to similar relief as per the Kultar Export case.

4. Considering the precedents and the interpretation of Circulars, the court set aside the impugned order disallowing the Central Excise portion of the drawback. The court found in favor of the petitioners, aligning with the decision in the Kultar Export case. As a result, the writ petitions and pending applications were allowed in favor of the petitioners, granting them the relief sought.