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TMI Blog2012 (12) TMI 474X X X X Extracts X X X X X X X X Extracts X X X X ..... e duty paid and hence non-Cenvat credit availed, as when Cenvat credit is used by a manufacturer for payment of duty on goods cleared for home market, the same has been given back to the Government, is, in our view, totally wrong and contrary to the provisions of the law Since export was made under drawback claim and such claim was received by the appellant during period prior to 25-5-2009 and as per the Board’s instructions excise portion of drawback is not available in respect of goods exported by a Merchant exporter purchased from traders in the market, the appellant has been unjustly enriched. It has failed to establish a prima facie case in its favour making an unlawful claim. Therefore the claim was contrary to the statutory provisions of the Rule 3 of the Drawback Rules. In terms of provisions of Section 129E, as discussed in para 6 to 6.2 above, pre-deposit of entire drawback unjustly availed must be paid back to treasury. The appellant, is therefore, directed to deposit entire duty drawback of Rs. 2,43,59,006/- (Rupees Two Crore Forty Three Lakh Fifty Nine Thousand and Six) already availed within a period of eight weeks from the date of pronouncement of this order. ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... t firm of excise portion of drawback amounting to Rs. 2,54,95,060/- under Rule 16 of the Drawback Rules read with Section 75A(2) of Customs Act, 1962, along with interest on it under Section 75A(2) read with Section 28AB ibid; (b) imposition of penalty on the appellant firm and Shri Himanshu Dawer and Shri Davinder Singh Dawer under Section 114(iii) and 114AA of Customs Act, 1962f; and (c) appropriation of an amount of Rs. 10,00,000/- already deposited by the appellant. 1.1 The above show cause notice was adjudicated by the Commissioner of Customs, New Delhi vide order-in-original No. MIJM/ACE/85/2011 dated 30-8-11 by which - (a) drawback demand of Rs. 2,43,59,006/- was confirmed under Rule 16 of Drawback Rules, read with Section 75A(2) alongwith interest on it under Section 75A(2) read with Section 28AB and the amount of Rs. 10,00,000/- already paid was appropriated towards this demand; (b) penalty of Rs. 2,43,59,006/- was imposed on the appellant firm under Section 114(iii) and 114AA of the Customs Act, 1962, but no separate penalty was imposed on Shri Himanshu Dawer and Shri Davinder Singh Dawer. 1.2 Against the above order, this appeal along with sta ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ived for hearing of the appeal and recovery thereof may be stayed till the disposal of the appeal. 4. Shri K.P. Singh, the learned Senior Departmental Representative, defended the impugned order by reiterating the findings of the Commissioner (Appeals) in the impugned order and pleaded that - (a) the exports of RMGs and scarves had been made during period from April 2006 to February 2008 when the Board s Circular No. 64/1998 dated 1-9-1998 was in force, according to which in case of merchant exporter who procures export goods from the open market, the benefit of all industry rates of duty drawback shall be restricted to customs portion only, if any, as the goods purchased from open market are to be treated as having availed Modvat facility and would not be entitled to excise portion of all industry rate and in this case, the goods exported, undisputedly, had been purchased from open market, and the appellant, in spite of opportunity being given to them, have not produced any evidence regarding non-availment of Cenvat credit for claiming full drawback; (b) Board s Circular No. 16/2009-Cus., dated 25-5-2009 cannot be applied retrospectively; (c) in terms of 1st pr ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... the appellate Tribunal, may dispense with such deposit subject to such condition as he or it may deem fit to impose so as to safeguard the interests of revenue. There is no dispute that the provisions of this Section are applicable, as the goods in respect of which the duty drawback has been claimed and received by the appellant, have been exported and are not under the control of the customs authorities. The point of dispute is as to whether the pre-deposit of duty drawback interest and penalty would cause undue hardship and should be waived on this ground under proviso to Section 129E. 6.1 On the question as to what constitutes undue hardship and what facts must be kept in mind while granting dispensation from the compliance of the provision of Section 35F of Central Excise Act, 1944, which is in pari materia with the provisions of Section 129E of the Customs Act, 1962, Hon ble Andhra Pradesh High Court in case of SQR International Ltd. v. CCE, Hyderabad 2012 (276) E.L.T. 465 (A.P.) = 2012 (25) S.T.R. 113 (A.P.), relying upon - (a) judgments of the Apex Court in the cases of Benara Valves Ltd. v. CCE reported in 2008 (12) S.T.R. 104 (S.C.) = 2006 (204) E.L.T. 513 (S.C. ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ment of pre-deposit would cause undue hardship. A corollary to this principle would be that when the situation is reverse, the pre-deposit must be insisted. Thus when the issue involved in the appeal stands decided in favour of the Revenue by the judgments of the Apex Court/High Court/Tribunal or on the basis of evidence on record, there is strong prima facie case against the assessee, granting waiver would cause irreparable damage to the interests of the Revenue and the balance of convenience would be against granting the waiver. A person who is, prima facie, found to have evaded taxes by resorting to fraud, wilful misstatement, suppression or contravention of the law with intent to evade the tax would not deserve the dispensation from the compliance with the provision of Section 129E of Customs Act, 1962 or Section 35F of the Central Excise Act, 1944. 6.2 The stay application shall be decided keeping the above principles in mind and for this, the main point which has to be decided is as to whether the appellant have a prima facie case in their favour. 7. Before coming to the question as to whether the appellant have a prima facie case or not, it will be worthwhile having a lo ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... der Rule 3 of the Cenvat Credit Rules, 2002/2004, which can either be used by a manufacture for payment of duty on the final products cleared from the factory for home consumption or can be en-cashed as cash refund of accumulated Cenvat Credit under Rule 5 of Cenvat Credit Rules, 2002/2004, if the same has accumulated due to clearance of finished goods for export under bond without payment of duty and the same cannot be used for payment of duty on clearances for home consumption, is an equivalent benefit. Thus the three export benefits - excise portion of duty drawback, input/input service tax rebate under Rule 18 of Central Excise Rules, 2002 and Section 93A read with Section 94 of the Finance Act, 1994 and Cenvat Credit under Cenvat Credit Rules utilised either for payment of duty on clearances for home consumption or en-cashed under Rule 5 of Cenvat Credit Rules are equivalent and an exporter can get any one of these three benefits, not more than one benefit in respect of a particular export of goods. It is in this background that Rule 3 of the Drawback Rules provides as under :- (1) subject to the provisions of - (a) the Customs Act, 1962 and the rules made thereunder; ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... regarding non-availment of input duty Cenvat credit in respect of the goods exported under drawback claim is a must for claiming full drawback i.e. the drawback including the excise portion. The circular dated 14-11-2003 also directed the Commissioners to devise a procedure for selection of such declarations regarding non-availment of Cenvat credit for verification and taking action for exemplary punishment when the declaration regarding non-availment of input duty credit are found to be false. 7.2.3 It is only in the Board s Circular No. 16/2009-Cus., dated 25-5-2009 that without any amendment to proviso to Rule 3 of the Drawback Rules, the Board totally reversed its stand with regard to grant of drawback at all industry rate to merchant exporters and clarified that full drawback including Central Excise portion would be available to merchant exporter in respect of export of the goods purchased from open market, without production of any certificate regarding non-availment of input duty credit. In this regard, para 6 of the Circular is reproduced below :- 6. As regards the proviso to Rule 3 of the Drawback Rules, it is viewed that the interpretation that this proviso permits ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... nt to encashment of the Cenvat credit by the manufacturer. The actual return of Cenvat credit would be its reversal without its utilisation towards payment of duty or obtaining its cash refund under Rule 5 of the Cenvat Credit Rules, 2004. (b) Availment of input/input service Cenvat credit under Cenvat Credit Rules, 2004 whether utilised for payment of duty on clearances of finished goods to home market or for encashment under Rule 5 of Cenvat Credit Rules, in case of clearances of finished goods for export under bond, is nothing but input duty rebate available under Rule 18 of Central Excise Rules and input service rebate available under Section 93A of the Finance Act, 1994. The excise portion of all industry rate of drawback being refund of excise duty on inputs and service tax on input services is equivalent to input/input services Cenvat credit or input/input service tax rebate. The three benefits - input/input service Cenvat credit, input/input service tax rebate under Rule 18 of Central Excise Rules and excise portion of drawback under Rule 3 of Drawback Rules and Section 93A of Finance Act, 1994, are equivalent and a person can avail only one of the three benefits in r ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... the factory failing which such rebate is not admissible. (d) If the Board wants to give full drawback at all industry rate including excise portion of drawback to merchant exporters without insisting on production of evidence regarding non-availment of input/input service Cenvat credit in respect of the goods being exported, the provisions of Rule 3 of the Drawback Rules must be suitably amended to permit this. Without amending the Rule 3, the Board s Circular dated 25-5-2009 is without the authority of law. 7.2.5 The Apex Court in the case of CCE v. Ratan Melting Wire Industries reported in (2008) TIOL-194-S.C. = 2008 (12) S.T.R. 416 (S.C.) = 2008 (231) E.L.T. 22 (S.C.) has held that the Board s Circular contrary to statutory provisions has no existence in law. Prima facie it appears that decision in case of M/s. Kutlar Exports v. CC, New Delhi (Order No. C/411/11 dated 14-9-2011) which is based on the Board s Circular No. 16/09 dated 25-5-2009 runs counter to basic provisions of statute. 8.1 In this appeal, as apparent from the appeal memo, the appellant trader had purchased the goods for export under drawback claim from traders. Admittedly no declarations about det ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ced below, that does not permit total waiver of pre-deposit to protect interest of Revenue :- 7. We have come across cases where the collection of public revenue has been seriously jeopardised and budgets of Governments, and Local Authorities affirmatively prejudiced to the point of precariousness consequent upon interim orders made by courts. In fact, instances have come to our knowledge where Governments have been forced to explore further sources for raising revenue, sources which they would rather well leave alone in the public interest, because of the stays granted by Courts. We have come across cases where an entire Service is left in a stay of flutter and unrest because of interim orders passed by courts, leaving the work they are supposed to do in a state of suspended animation. We have come across cases where buses and lorries are being run under orders of Court though they were either denied permits or their permits had been cancelled or suspended by Transport Authorities. We have come across cases where liquor shops are being run under interim orders of court. We have come across cases where the collection of monthly rentals payable by Excise Contractors has been stay ..... X X X X Extracts X X X X X X X X Extracts X X X X
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