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TMI Blog2011 (2) TMI 1078X X X X Extracts X X X X X X X X Extracts X X X X ..... ral Excise drawback at the rate of 10.5% subject to a maximum of Rs.26.50 per kg. of polyester filament yarn content. In a show-cause notice dated 18.7.2001, the Deputy Commissioner of Customs (DBK) proposed to (a) reject the drawback claim, (b) hold the exported goods to be liable to confiscation under Section 113(i) of the Customs Act and (c) impose penalty under Section 114(iii) of the Act. The reasons stated for denial of drawback was that the input used in the manufacture of the exported product was grey fabric on which Central Excise duty/countervailing duty (CVD) was not payable and hence the appellant was not eligible for drawback. This ground for denial of drawback was raised with reference to clause (ii) of the second proviso to Rule 3 of the Customs and Central Excise Duties and Service Tax Drawback Rules, 1995, which reads as follows: "Provided further that no drawback shall be allowed" (i).... (ii) If the said goods are produced or manufactured using imported materials or excisable materials or taxable services in respect of which duties or taxes have not been paid..... The show-cause notice was contested by the party who submitted inter alia that ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... was whether the basic inputs like yarn, dyes etc. were duty-paid. Any Central Excise duty payable at intermediate stages of the manufacture of the above man-made fabrics was not relevant to the context. It was submitted that the grey fabrics used in the manufacture of the export goods had been manufactured out of yarn and other basic raw materials procured from the market. The Revenue did not have a case that the polyester filament yarn (PFY), which had gone into the manufacture of grey fabric, which was used in the manufacture of dyed/printed polyester fabric, was not duty-paid. Where the basic input (PFY) was duty-paid and no MODVAT credit of such duty was availed, there was no justification to reject the drawback claim. According to the learned counsel, the drawback claim satisfied the essential requirement of Rule 3 of the Customs and Central Excise Duties and Service Tax Drawback Rules, 1995. Therefore, he prayed for allowing the appeal. 3. The learned SDR argued in defence of the Commissioner's order. He submitted that, under DFRC-cum-Drawback Scheme where the import of input was made after the export of finished product, the importe ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... was submitted that, in the present case, investigations revealed that grey fabric had been used as input in the manufacture of the exported product and, therefore, the appellant was not eligible for drawback. It was also pointed out by the SDR that the appellant did not challenge the Commissioner's finding that grey fabric was used as input in the manufacture of the exported product. Central Excise duty was not leviable on grey fabrics, nor did the appellant show that such duty was actually paid on the grey fabrics used in the manufacture of the exported product. Therefore, grant of drawback was barred by the second proviso to Rule 3(1) of the Customs and Central Excise Duties and Service Tax Drawback Rules, 1995. 4. In his rejoinder, the learned counsel reiterated that the shipping bills had been finally assessed by accepting the exporter's declaration that the exempted material used in the export goods was dyed polyester fabric and, therefore, the Revenue was precluded from taking a contrary view regarding the input used in the export goods. He submitted that the input used in the export goods was dyed polyester fabric as accepted by the assessing authority and ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ric under DFRC on payment of CVD and without payment of BCD and SAD by availing the benefit of Notification No.48/2000-Cus. ibid. Before this importation, they exported dyed & printed polyester fabrics under DFRC-cum-Drawback Scheme by declaring the input used therein to be dyed polyester fabric, and obtained DFRCs from the licensing authority on the strength of the finally assessed shipping bills. Drawback was claimed in Shipping Bills at "All Industry rate" prescribed in the relevant schedule of drawback rates. It is this claim which has been opposed on the strength of the second proviso to Rule 3(1) of the Customs and Central Excise Duties and Service Tax Drawback Rules, 1995, which says that no drawback shall be allowed if the export goods are produced or manufactured, using importer materials or excisable materials or taxable services in respect of which duties or taxes have not been paid. We find that the aforesaid plea of the counsel that the appellant had option to import either grey fabric or dyed fabric as replenishment for the material used as input in the exported product was not made before the adjudicating authority. We are of the view that the plea should ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... as under:- "7.4 Duty Free Replenishment Certificate is issued to a merchant-exporter or manufacturer-exporter for the import of inputs used in the manufacture of goods without payment of basic customs duty, and special additional duty. However, such inputs shall be subject to the payment of additional customs duty equal to the excise duty at the time of import. (i) Duty Free Replenishment Certificate shall be issued only in respect of export products covered under the SIONs as notified by DGFT. However, DFRC shall not be issued in respect of SIONs which are subject to "actual user" condition or where the input is allowed with prior import condition or where the norms allow import of acetic anhydride, ephedrine and pseudo ephedrine in the Handbook (Vol-II). (ii) Duty Free Replenishment Certificate shall be issued for import of inputs, as per SION, having same quality, technical characteristics and specifications as those used in the end product and as indicated in the shipping bills. The validity of such licences shall be 18 months. DFRC and or the material(s) imported against it shall be freely transferable. (iii) The Duty Free Replenishment Certificate shall be subject to a ..... X X X X Extracts X X X X X X X X Extracts X X X X
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