2016 (3) TMI 796 - HC - Customs

Entitlement for Custom duty drawback in terms of Notification No. 26/2003-Cus (N.T), dated 01.04.2003 - Export of zinc but not entitled to claim drawback on account of excise - Finished goods were removed under bond without payment of duties, covered under the provisions of Rule 2(f) of the Notification dated 01.04.2003 and, therefore, All Industry Rates under Drawback Scheme is not admissible contended by the Department - Held that - petitioners had manufactured their goods and exported them in terms of sub-Rule (2) of Rule 19 of the Central and Excise Rules 2002, so the question of admitting the claim of the Petitioners towards customs allocation drawback is not at all justified. There is no scope of bifurcating drawback towards customs and excise allocation. It is well settled that the taxation and fiscal statutes have to be strictly construed. The Courts cannot read words into such proviso. Once it is not disputed that the Petitioners have availed of the benefits under Rule 19(2) ibid, the question of availing any drawbacks in terms of said Notification would not arise at all. Therefore, as the petitioners has availed the said benefits and removed exported excisable goods without payment of duty from the factory, the question of availing of any drawback in terms of the said Scheme is not at all justified. - Decided against the petitioner

Issues Involved:
1. Entitlement to duty drawback under Notification No. 26/2003-Cus (NT) dated 01.04.2003.
2. Applicability of Rule 19(2) of the Central Excise Rules, 2002.
3. Interpretation of fiscal and taxation laws.
4. Validity of the rejection of drawback claims by the customs authorities.

Issue-wise Detailed Analysis:

1. Entitlement to Duty Drawback under Notification No. 26/2003-Cus (NT) dated 01.04.2003:
The Petitioner, a 100% Export Oriented Unit (EOU) engaged in the manufacture of zinc oxide, claimed duty drawback under Sr. No. 28.06 of the Drawback Schedule. The Petitioner contended that the All Industry Rate of Drawback is admissible even if Cenvat is availed, as they claimed only the Customs portion of the drawback. The Customs Authorities raised objections based on General Note 2(f) of Notification No. 26/2003-Cus (NT), which led to the rejection of the Petitioner's drawback claims. The authorities maintained that the drawback is not applicable to goods manufactured or exported under Rule 19(2) of the Central Excise Rules, 2002.

2. Applicability of Rule 19(2) of the Central Excise Rules, 2002:
The Petitioner exported goods manufactured using inputs received indigenously under Rule 19(2) of the Central Excise Rules, 2002, without claiming any rebate against inputs or final products. The Customs Authorities, however, rejected the drawback claims, citing that the All Industry Rate of Drawback is not applicable to goods manufactured or exported under Rule 19(2). The authorities emphasized that the specific proviso of non-applicability of AIR of Drawback under Notification No. 26/2003-Cus (NT) dated 01.04.2003 takes precedence.

3. Interpretation of Fiscal and Taxation Laws:
The Petitioner argued that the intention of the Government is to ensure no exported goods suffer tax, and thus, they should be entitled to the Customs portion of the drawback. The Respondents countered that fiscal and taxation laws must be strictly construed, and since the Petitioners availed the benefit of Rule 19(2), they are disentitled from claiming any alleged drawback for Customs Duty. The authorities held that the Notification dated 01.04.2003 explicitly excludes goods manufactured or exported under Rule 19(2) from the drawback scheme.

4. Validity of the Rejection of Drawback Claims by the Customs Authorities:
The Deputy Commissioner of Customs, the Commissioner (Appeals), and the Joint Secretary to the Government of India, all upheld the rejection of the Petitioner's drawback claims. They consistently interpreted that the Notification dated 01.04.2003, particularly proviso 2(f), precludes any drawback for goods manufactured or exported under Rule 19(2). The authorities emphasized that the Petitioners' claim of bifurcating customs and excise allocation for drawback is not supported by any Notification or Rules. The authorities further noted that the Petitioners' reliance on various Circulars and judgments was misplaced as they did not pertain to the specific exclusion under Rule 19(2).

Conclusion:
The High Court upheld the findings of the customs authorities, concluding that the Petitioners, having availed the benefits under Rule 19(2) of the Central Excise Rules, 2002, are not entitled to any duty drawback under Notification No. 26/2003-Cus (NT) dated 01.04.2003. The Court emphasized that fiscal statutes must be strictly construed, and the specific exclusions in the Notification cannot be circumvented. The Petition was accordingly rejected.

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