2016 (11) TMI 1223 - AT - Central Excise

Duty drawback - appellant has failed to establish that the goods imported under advance licenses were not utilised on manufacture of exported goods on which duty drawback is claimed - Held that - Duty drawback is a relief by way of refund of customs/excise duties paid on inputs or raw materials and service tax paid on input services used in the manufacture of export goods - The second proviso to Rule 3 of Drawback Rules, 1995 states that the exporter cannot claim drawback if duties have not been paid on the inputs, input services. The intention of the said Rule is not to allow drawback on inputs obtained without payment of customs or excise duty. The contention put forward by appellant is that out of the 27 inputs only 5 were imported. The remaining 22 inputs suffered duty. That being a processing industry, the input gets mixed up and it is very difficult to identify a particular input imported under Advance License and used for manufacture and the quantity of inputs imported by Advance License used in manufacture being very less the drawback may allowed. I am not able to agree with this contention of appellant. When the Rule itself, does not permit drawback in case of inputs on which duty has not been paid, the appellant ought to have maintained some procedure/ segregation / accounting method for the inputs used in manufacture of products exported, if the appellant intended to claim drawback. The rejection of drawback claim on this ground holds merit. Appeal dismissed - claim of duty drawback rejected - decided against exporter-appellant.

Summary

Issues:
1. Rejection of duty drawback claims based on failure to establish non-utilization of goods imported under Advance Licenses in the manufacture of exported goods.
2. Time-barred claim for duty drawback.
3. Rejection of drawback claim due to alleged lack of evidence of payment from Foreign Currency Account of SEZ unit.
4. Rejection of duty drawback claim based on the use of duty-free inputs imported under Advance License in the manufacture of exported goods.

Analysis:
1. The appellant's duty drawback claims were rejected by the adjudicating authority and the Commissioner (Appeals) primarily due to the appellant's failure to prove that goods imported under Advance Licenses were not used in the manufacture of exported goods. The appellant argued that the Drawback Rules do not explicitly impose such a condition, but the rejection was upheld based on this ground.

2. The issue of the claim being time-barred was raised by the original authority, citing Rule 13 of the Drawback Rules, 1995. The appellant contended that the claim was made within the specified time frame as per the rule, emphasizing that manual application for drawback was not necessary, and the triplicate copy of the Shipping Bill was deemed to be a claim for drawback.

3. Another ground for rejecting the drawback claim was the alleged lack of evidence showing payment from the Foreign Currency Account of the SEZ unit. The appellant argued that the Shipping Bill contained the required undertaking from the SEZ unit, stamped therein, and the rejection on this ground was deemed unjustified by the appellant.

4. The rejection of the duty drawback claim based on the use of duty-free inputs imported under Advance License in the manufacture of exported goods was a significant issue. The appellant contended that only a small percentage of inputs were imported duty-free and that it was challenging to identify specific inputs used in manufacturing. However, the Tribunal upheld the rejection, emphasizing the rule's intent not to allow drawback on inputs without duty payment and the appellant's failure to maintain proper segregation or accounting methods for claiming drawback.

In conclusion, the Tribunal dismissed the appeals, finding no grounds to interfere with the impugned orders, thereby upholding the rejection of duty drawback claims based on various grounds including failure to establish non-utilization of duty-free inputs imported under Advance Licenses in the manufacture of exported goods.