2019 (4) TMI 339 - AT - Customs

Duty Drawback - legality of withholding of additional duties of customs, amounting to ₹ 47,07,366/-, that had been discharged at the time of import - Held that - Doubtlessly, the importer is entitled to avail CENVAT credit of additional duties under CENVAT Credit Rules, 2004 which, in this context was available in two tranches prescribed for capital goods. It is also not in dispute that CENVAT credit so availed had been reversed. It would appear that the provisions of CENVAT Credit Rules, 2004, pertinent to officers of central excise and service tax, has been drawn upon by officers of customs, without authority to do so, for denying claim of drawback. CENVAT credit is a facility that enables the discharge of duty of excise on excisable goods out of common pool and the availment of such credit is, by no stretch of law or procedure or imagination, a discharge of excise duty liability; in fact, the availment arises from, in this instance, from the discharge of additional duties of customs. Under section 74 of Customs Act, 1962, the eligibility is to the extent of 98% of any duty has been paid on importation . The duties of customs, for the purpose of this dispute, is the aggregate of the basic customs duty and the additional duty of customs and as section 74 of Customs Act, 1962 is thus applicable to the whole of this duty put together, it was improper on the part of lower authorities to disaggregate this. Furthermore, though the appellant had availed CENVAT credit on entry of the capital goods into the premises of the appellant, factum of exports would disentitle them from such availment ab initio. It is in pursuance of such disallowance that the credit so availed was reversed. It may not, therefore, be deemed to have been retained by the appellant at all. There is no justification for withholding of the prescribed percentage of drawback at 98% of the additional duty of customs as held by the two lower authorities - appeal allowed - decided in favor of appellant.

Summary

Issues:
1. Eligibility for drawback of customs duties under section 74 of Customs Act, 1962.
2. Dispute regarding withholding of additional duties of customs.
3. Interpretation of CENVAT credit rules in relation to the discharge of customs duties.

Analysis:

Issue 1: Eligibility for drawback of customs duties under section 74 of Customs Act, 1962
The appeal pertains to the import of 'spares for oil field equipment' by M/s Hindustan Petroleum Corporation Ltd, eligible for drawback of customs duties under section 74 of the Customs Act, 1962. The claim for drawback was initially rejected due to a delay beyond the specified period, but upon remand, the original authority limited the drawback to 98% of the duty paid. The appellate tribunal confirmed the eligibility for 98% drawback, and the dispute centered around the withholding of additional duties of customs paid at the time of import.

Issue 2: Dispute regarding withholding of additional duties of customs
The primary contention revolved around the withholding of additional duties of customs amounting to &8377; 47,07,366, which were discharged at the time of import. The original authority and the Commissioner of Customs (Appeals) held that the appellant's reversal of CENVAT credit, equivalent to the additional duties paid, did not change the position. They argued that the CENVAT credit rules did not allow the credit to be utilized for payment of customs duties other than excise duties, leading to the rejection of the claim for the additional duty amount in the drawback calculation.

Issue 3: Interpretation of CENVAT credit rules in relation to the discharge of customs duties
The tribunal emphasized that the availment of CENVAT credit is not equivalent to the discharge of excise duty liability but arises from the payment of additional duties of customs. The authorities' reliance on CENVAT credit rules for denying the drawback claim was deemed improper. The tribunal clarified that the duties of customs, for the purpose of the dispute, encompassed both basic customs duty and additional duty of customs. Therefore, disaggregating these duties for drawback calculation was incorrect. The appellant's reversal of the CENVAT credit upon export disentitled them from the credit availment, and it was not retained by the appellant. Consequently, the withholding of the prescribed percentage of drawback on the additional duty of customs was deemed unjustified, leading to the allowance of the appeal with consequential relief.

In conclusion, the tribunal ruled in favor of the appellant, emphasizing the incorrect application of CENVAT credit rules and the improper withholding of the prescribed drawback percentage on additional duties of customs.