2017 (10) TMI 363 - HC - Customs

Duty Drawback - exports of the gloves - Rule 3 of the Customs, Central Excise Duties and Service Tax Drawback Rules, 1995 - Rule 3(1) second proviso clause ii thereof - Held that - When the import is without any cost and duty free, and in the facts of the present case, where the inner material so imported is used in the gloves exported and when the petitioner is not claiming that the inner material is produced or manufactured in India for export, the question of applicability of Rule 3(1) second proviso clause ii does not arise. The inner material is not being produced or manufactured by the petitioner in India. It is an imported material, which is exported as part of the gloves. The gloves otherwise is offered for taxation in India. The contention of the authorities that, the export of gloves attracts the provisions of Rule 3 of the Customs, Central Excise Duties and Service Tax Drawback Rules 1995 is misplaced - it would be appropriate to request the authorities to consider and decide the claim for duty drawback made by the petitioner in accordance with law - petition disposed off.

Summary

Issues:
1. Entitlement to duty drawback on exports of gloves.
2. Interpretation of Rule 3(1) second proviso clause [ii] of the Customs, Central Excise Duties and Service Tax Drawback Rules, 1995.

Analysis:
1. The petitioner sought duty drawback on the exports of gloves, claiming entitlement based on past practices. The authorities, however, sought to deny the duty drawback citing Rule 3 of the Customs, Central Excise Duties and Service Tax Drawback Rules, 1995. The petitioner imported inner linings for the gloves free of cost and duty, which was declared in the shipping bill. The petitioner argued that since the inner material was not produced or manufactured in India and was exported as part of the gloves, the provisions of Rule 3(1) second proviso clause [ii] did not apply. The Court noted the undisputed facts and directed the authorities to reconsider the duty drawback claim.

2. The key issue revolved around the interpretation of Rule 3(1) second proviso clause [ii] of the Rules of 1995. The rule states that no drawback shall be allowed if the goods are produced or manufactured using imported materials or taxable services on which duties or taxes have not been paid. In this case, the petitioner imported inner linings for the gloves without any cost or duty payable. Since the inner material was not produced or manufactured in India and was exported as part of the gloves, the Court held that the provisions of Rule 3(1) second proviso clause [ii] were not applicable. The Court emphasized that the gloves were offered for taxation in India, and the authorities' contention regarding the applicability of Rule 3 was deemed misplaced.

Overall, the Court disposed of the writ petition, instructing the authorities to reconsider the duty drawback claim in line with the law. No costs were awarded in the matter.