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TMI Blog2014 (1) TMI 531X X X X Extracts X X X X X X X X Extracts X X X X ..... context that there was a bona fide belief because of the circulars from 2001 onwards that they were eligible for the impugned drawback. Court is not inclined to confirm such huge liability for past periods based on Circulars which were in the knowledge of the department and which were not implemented. We would like to rely more on the legal provisions. The only legal provision relied upon is Rule 3 of the Drawback Rules. We agree with the interpretation to this Rule given by the Board in Circular 16/2009-Cus. Interpretation is not applicable from date of issue of Circular 16/2009-Cus. because the Rule has remained the same except for amendment on 13-7-2006, to take care of incidence and rebate of Service Tax - Decided in favour of assessee. - C/15/2010 - Final Order No. C/411/2011(PB) - Dated:- 14-9-2011 - Shri S.S. Kang and Mathew John, Members (T) Shri T.R. Rastogi, Advocate, for the Appellant. Shri Sonal Bajaj, SDR, for the Respondent. ORDER The appellants are engaged in the business of export of ready-made garments and textiles. They purchase such items from traders and export them and claim drawback, of duties borne by inputs going into the manufacture of ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... st 326 shipping Bills between the period 2003-2004 to 2006-2007 either by not submitting the non-availment of Cenvat certificate declaration in Annexure I as required under Board Circular No. 54/2001, dated 19-10-2001 and No. 8/2003, dated 17-2-2003 or by giving a false declaration that non-availment of Cenvat certificate attached whereas in their statements both the partners of the party have denied having sourced the exported goods through job worker/supporting manufacturer. The CHAs M/s Genuine Cargo Services and M/s. Innovative Services who handled the exports of the party at different points of time had filed the shipping bills under their signatures confirming that the non-availment of Cenvat certificate was attached. During the investigation both these CHAs in their written replies have taken a U turn that they neither filed any Annexure for claiming higher rate of duty drawback (Central Excise Portion) nor it was given to them by the party at the time of export of the goods as such they did not furnish the required declaration for claiming the higher rate of duty drawback. This fact is further strengthen from the statement of the partners of the party that they had exported ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... m the market and exports, called a merchant-exporter. 6. The Counsel for the appellant argues that certificate as per Circular 54/2001-Cus., dated 19-10-2001 is applicable only to the first two categories of exporters and not the third category of exporters to which the appellant belongs. To support his argument he took us through the various Circulars issued by the Board in this regard, which are the following : 6.1 Circular 54/2001-Cus., dated 19-10-2001 Sub : Problems faced by Merchant-Exporters regarding availment of drawback on garments - Reg. All categories of Ready-made woven garments (other than raincoats, undergarments and clothing accessories) falling under Chapter 62 of Customs Central Excise Tariff Act are now subject to central excise levy as a result of the changes announced in the Union Budget, 2001-2002 (Finance Bill stage and those made thereafter till the Finance Bill was enacted.) Though normally it is the actual manufacturer who is to pay duty of excise leviable on any commodity, considering the peculiar and very decentralised nature of garment producing sector certain special provisions have been made, wherein the merchants who get their garmen ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... independently if need be to check its veracity. 4. The issue and request has been examined and the production and export pattern and system of excise control and duty payment/CENVAT in garment industry also looked into. It is observed that in the case of the goods manufactured by manufacturer-exporters, there shall not be any difficulty in verifying the declaration that Cenvat facility has not been availed in as much as for dutiable garments, if cleared for export under bond/rebate claim, movement has to be made under ARE-1 and such exporters can evidence the same through production of an ARE-1 issued. 5. For the exports, where ARE-1 is not issued, it has been decided that they should clearly declare on the Shipping Bills, the name(s) of the job worker(s)/supporting manufacturing unit(s) through whom the garments covered by the Shipping Bill have been manufactured. These exporters shall also be required to give a declaration in the format given in the Annexure-I certifying inter alia that they are not registered with the Central Excise and that they are not paying any Central Excise duties and not availing of the Cenvat facility and that they have not authorised any supporting ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... iling higher All Industry Rate of Drawback. (Circular No. 54/2001-Cus., dated 19th October, 2001). 1. Description of the Goods : 2. Invoice No. and Date : 3. Name and address of the Exporter along with the name of the Jurisdictional Central Excise Commissionerate/Division/Range : 4. Name of the Supporting Manufacturer (s)/Job worker (s) along with the name of the Jurisdictional Central Excise Commissionerate/Division/Range : 5. Address of the Manufacturing Unit(s)/Job Work Premises : We, M/s. ______________, the Exporters of the above mentioned goods, hereby declare that - (a) we are not registered with Central Excise authorities, (b) we have not paid any Central Excise duty on these goods, and (c) we have not availed of the Cenvat facility under the CENVAT Credit Rules, 2001 or any notification issued thereunder, and (d) we have not authorised any supporting manufacturer/job-worker to pay excise duty and discharge the liabilities and comply with the provisions of Central Excise (No. 2) Rules, 2001, under the proviso to Rule 4(3) of the said Rules. We also undertake that in case it is discovered t ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... his condition is that no double benefits should accrue to the exporters because through the Cenvat facility as well as duty drawback, exporters are rebated the duties of Central Excise suffered on the inputs used in the manufacture of the export products. 2. There have been a large number of representations from the trade that they find it difficult to furnish the certificate from Central Excise authorities for every export consignment. This matter had been considered by the Kelkar Committee set up to examine the possibility of reforms in the Indirect Tax Administration. 3. After accepting the recommendations of the Committee, the Board has decided that henceforth the manufacturer-exporters who are not registered with Central Excise or such merchant-exporters whose supporting manufacturer are not registered with the Central Excise, shall not be required to furnish any certificate as to the non-availment of Cenvat facility from the jurisdictional Central Excise authorities. 4. It has been decided that instead these manufacturer exporters and merchant-exporters with a supporting manufacturer shall be required to give a self-declaration that such manufacturer-exporters or the s ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... y Rates of drawback are based on the concept of averages, where the drawback rate itself as well as its customs and excise portions are based on weighted averages of consumption of imported/indigenous inputs of a representative cross-section of exporters and the average incidence of duties suffered on such inputs. These rates have no relation to the actual input consumption pattern or the actual duty incidence suffered on inputs of a particular exporter or individual consignments exported by any exporter under drawback claim. It was categorically stated in the said Circular that the first proviso to Rule 3 of Drawback Rules, 1995 is meant for the Ministry and that it essentially provides a guideline as to how the duty drawback rates are to be determined in certain situations and is not intended for the field formations to use this rule for arbitrarily altering All Industry Rates of duty drawback in the case of individual exporters for individual consignments. 3. From the above it may be noted that the concept of All Industry Rate of duty drawback is that the rates are determined taking into account the average duties paid on the inputs and in determining the rates, the average (w ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ers and can at best declare the names of traders from whom the goods have been purchased. Further, most of the garments are being manufactured by petty manufacturers/small scale cottage industries/largely unorganized sector outside the Cenvat chain and, therefore, the higher rate of drawback may be given on garments without insisting on any Cenvat non-availment declaration. 3. The matter was discussed with some field formations. A view was expressed that the proviso to Rule 3 of the Drawback Rules does not permit full drawback (both customs and central excise portions) if Cenvat has been taken on inputs used in the manufacture of export goods and therefore full drawback (including the excise portion) cannot be granted to such goods. 4. The matter was referred to the Committee constituted by the Government to formulate All Industry Rate of Duty Drawback for the year 2008-2009. The Committee in its report for the year 2008-2009 has recommended that the merchant-exporters who source their export goods from the market should be given higher rate of drawback without any declarations as they have to purchase the products from the manufacturer after excise clearance i.e. after paymen ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... arket. Such rebate is presently not possible in terms of No. 19/04-C.E. (N.T.) and 20/04-C.E. (N.T.) as the rebate is granted only if goods are exported directly from the factory/warehouse and not from the market. However, as an abundant precaution, the merchant-exporters sourcing their goods from the market and claiming central excise portion of duty drawback may be asked to specifically declare, at the time of export, that no rebate (both input rebate and final product rebate) shall be taken against the exports made against these shipping bills. 7. In view of the above, the Board has decided to accept the recommendation of the Drawback Committee in this regard. Thus merchant-exporters who purchase goods from the local market for export shall henceforth be entitled to full rate of duty drawback (including the excise portion). However, such merchant-exporters shall have to declare at the time of export, the name and address of the trader from whom they have purchased the goods. They shall also have to declare that no rebate (input rebate and also the final product rebate) shall be taken against the Shipping bills under which they are exporting the goods. The merchant-exporters wh ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... on the rest, or only a part of the duty chargeable has been paid; or the duty paid has been rebated or refunded in whole or in part or given as credit, under any of the provisions of the Customs Act, 1962 (52 of 1962) and the rules made thereunder, or of the Central Excise Act, 1944 (1 of 1944) and the rules made thereunder, the drawback admissible on the said goods shall be reduced taking into account the lesser duty or tax paid or the rebate, refund or credit obtained: 9.2 He further relies on Circular 17/97-Cus., dated 4-6-1997 which reads as under : Subject : General Note No. 11 of Notification No. 22/97- Cus. (N.T.), dated 30th May, 1977 - Requirement of Certificates regarding the non-availment of Modvat facility - Regarding. It has come to the notice that there is no uniformity in regard to interpretation of General Note 11 of Notification No. 22/97-Cus. (N.T.), dated 30-5-1997 [erstwhile Notification No. 49/96-Cus.(N.T.), dated 20-10-1996] regarding All Industry Rates of Drawback. It also appears that declarations by the Merchant-Exporters have been accepted regarding non-availment of Modvat. With a view to standardising the application of General Note 11, the follo ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... enue, Ministry of Finance, on the above subject, the following guidelines regarding requirement/acceptance of certificates of non-availment of Modvat facility for the purposes of processing the drawback claims may be followed in future : (i) In the case of goods exported under Bond or claim for rebate of Central Excise duty, an AR-4 Form duly certified, or a certificate from the concerned Supdt. of Central Excise in charge of factory of production shall be produced to the Customs to establish that no Modvat facility has been availed for the goods being exported. (ii) In respect of goods being exported without AR-4 Form, which are not unconditionally exempt from Central Excise duty or are dutiable, the manufacturer-exporters under Central Excise control shall produce a certificate twice a year (one in the beginning of the Financial Year, i.e., First Quarter and once around January-March, i.e., Last Quarter) from the Asst. Commissioner of Central Excise in whose jurisdiction the factory of production is located to the effect that no Modvat credit has been availed on any of the inputs used in the manufacture of export product clearly indicating the name of the manufacturer ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... rchant-exporter(s) where the name and address, including the factory address of the supporting manufacturer(s) from whom the export goods have been procured, have been declared in the Shipping Bills, duly accompanied by a certificate issued in favour of the declared supporting manufacturer by Central Excise Supdt. in charge of the factory of production to the effect that such manufacturer has not availed the Modvat on any of the inputs used in the manufacture of the export goods, in such cases the merchant-exporters should not be asked to produce a separate certificate regarding non-availment of Modvat credit in his own favour, (vi) In the case of merchant-exporter who procures the export goods from the open market, the benefit of All Industry Rates of Duty Drawback shall be restricted to the Customs allocation only, if any. Export goods purchased from the market shall be treated as having availed the Modvat facility and are not entitled to the Central Excise allocation of the All Industry Rate of Drawback. 9.4 Further the ld. DR draws attention to the last sentence of para 7 of circular 16/2009 (para 6.4 above) which makes it clear that the circular is in supersession of e ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... merchant-exporters who buy goods from the open market as in the case of this appellant but the drawback was supposed to be restricted to the customs portion only. However Revenue chose to grant drawback for excise portion also and after lapse of five years to one year, the drawback amounts granted on various shipping bills have been demanded to be paid back. There is also an argument that this appellant is being singled out for such treatment. This argument is relevant not in the sense whether a wrong can be corrected in the hands of one when others go scot free but in the context that there was a bona fide belief because of the circulars from 2001 onwards that they were eligible for the impugned drawback. 14. We are not inclined to confirm such huge liability for past periods based on Circulars which were in the knowledge of the department and which were not implemented. We would like to rely more on the legal provisions. The only legal provision relied upon is Rule 3 of the Drawback Rules. We agree with the interpretation to this Rule given by the Board in Circular 16/2009-Cus. The argument that this interpretation is applicable from date of issue of Circular 16/2009-Cus. is re ..... X X X X Extracts X X X X X X X X Extracts X X X X
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