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TMI Blog2014 (10) TMI 155X X X X Extracts X X X X X X X X Extracts X X X X ..... rand rate letters were issued by the office of the Commissioner of Central Excise, Pune-III Commissionerate. Subsequently, it was noticed that All Industry Drawback Rates had indeed been notified in respect of the goods exported by M/s. Cummins India, under Rule 3 of the Drawback Rules, vide Notification No. 36/2005-Cus. (N.T.), dated 2-5-2005 with effect from 5-5-2005, Notification No. 81/2006-Cus. (N.T.), dated 13-7-2007, Notification No. 68/2007-Cus. (N.T.), dated 16-7-2007, Notification No. 103/2008-Cus. (N.T.), dated 29-8-2008, in force from time to time. But the exporters never filed any drawback claims under Rule 3 ibid. Rather, they filed for determination of drawback rates under Rule 6(1)(a) and the rates were determined by the jurisdictional Commissionerate under Rule 6(1)(b) of the Drawback Rules. They had misdeclared that their export products have not been covered Rule 3 of the Drawback Rules, 1995. Rule 6(1)(a) is applicable only where no amount or rate of drawback has been determined in respect of any goods in terms of Rule 3 ibid. Even if the All Industry Drawback Rates had been notified in respect of the goods exported by M/s. Cummins India, under Rule 3 of the Dra ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... f Duty Exemption Scheme as contained in EXIM Policy notified under Foreign Trade (Development & Regulation) Act, 1992 read with relevant Customs Notifications has been availed of. As a matter of fact, the IC Engines exported by CIL during the period covered under this application were covered under Duty Exemption Scheme (Advance Authoization Scheme). Hence, CIL are not eligible for any duty drawback of Customs duty portion as they imported the raw materials without payment of Customs Duty. Further vide one of their Brand Rate applications (taken as a sample) bearing No. IMP/DBK/IC Engine/August 2008, dated 17-9-2008 they have declared that they are availing Cenvat credit under Rule 3 of Cenvat Credit Rules, 2004. Therefore, they are not eligible for Drawback on Central Excise portion & have violated the Brand Rate Letter conditions as above. Hence, drawback sanctioned & disbursed by Assistant Commissioner, Customs, ICD Dighi, Pune is recoverable under Rule 16 of the Drawback Rules with interest as applicable. 4.2 Further, in terms of Serial No. 7 of General Notes to the Notification No. 36/2005-Cus. (N.T.), dated 2-5-2005, drawback rates as specified in All Industry Rates (Un ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... of FOB Value of exports would only work out (by a rough average since the percentage varied between 1% and 1.5%) to Rs. 14.21 crores whereas after having availed of duty imports of 79.76 crores under 14 Advance Licenses, the exporters still received an amount of Rs. 22.13 crores by way of drawback under Rule 6(1) ibid - thereby implying duty suffered only on a part of the duty paid inputs. Even after this the drawback applied for and sanctioned to the exporters represented only the Customs allocation of the entitlement of drawback and excluding the Central Excise allocation and allocation on account of input services; in fact, the exporters have availed of duty and tax credits on account of CVD paid on duty-paid imports, central excise duty paid on domestic procurements of raw materials and input and input service tax credit availed of on services procured for manufacture and export of export products. Ideally and logically, they should have received an amount that is far less than what they would have received under Rule 3 since the AIR rates themselves represent duty suffrage at an average rate on the All Industry Rate of Input-Output Norms. 4.5 It may be mentioned that Rul ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... was to reimburse the incidence of duty suffered by the inputs or input services used in the manufacture of goods exported. Hence, assuming the allegations of the department is correct that the respondents are not eligible for drawback under either under Rule 3 as well as under Rule 6 and the purpose of the entire scheme would get defeated as the incidence of duty suffered by the respondents on part of the inputs would not be reimbursed. Therefore, to avoid such dispute and protect the benefit of the exporters, the C.B.E. & C. Circular No. 48/2011-Customs, dated 31-10-2011 was issued wherein C.B.E. & C. has specifically clarified that the drawback claim shall be allowed to the exporters under Rule 6 or Rule 7 of Drawback Rules in case if the exporters have availed the benefit of Advance Authorization while procuring partial the inputs and part of the inputs have suffered the incidence of duty. In view of the aforesaid circular the respondents were allowed to avail the drawback either under Rule 6 or Rule 7 of Drawback Rules. Accordingly, the respondents have correctly filed and received the drawback claim under Rule 6 of Drawback Rules. 5.3 It is submitted that even in the pr ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... dit of CVD and SAD paid on the inputs will not have any implication on the submission. The respondents will not be entitled for drawback of the duties, which were taken as credit. However, to determine whether the duty paid on the inputs is higher than the all industry rate of drawback for the purposes of Rule 7, all the duties viz. BCD, CVD, SAD and education cess have to be taken into account. 5.6 The respondents are entitled for drawback under Rule 7 in respect of goods exported can be easily demonstrated. For this purpose, the exports made under Shipping Bill No. 7707710, dated 25-8-2008 may be examined. The respondents have exported IC engine Model KTA-50 valued at Rs. 39,06,090.35/- (FOB Value) under this shipping bill dated 25-8-2008 All industry rate of drawback @ 1.3% on the FOB value declared in the shipping bill dated 25-8-2008 comes to Rs. 50,779.17/-. Whereas, as per the brand rate applications already filed under Rule 6 (which has been verified and approved), the quantum of duties suffered on the inputs used in the manufacture and export of the above model of IC engine is Rs. 61,237.98/- Thus, the difference between the All Industry Rate of Drawback and actual d ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... he provisions of Rule 6 of Drawback Rules, in Sr. 25 & 26 of the application it was clearly mentioned that the respondents had availed the benefit of advance authorization scheme under Notification No. 93/2004-Cus. for some of the inputs and for rest duty has been paid. Further, in Sr. No. 9B, it was mentioned that no All Industry Rate is available for the respondents and in Sr. No. 19 of the application the tariff classification of the goods exported by the respondents has also been provided by the respondents. It is therefore submitted that there is no misdeclaration by the respondents as alleged in the revision application. 5.10 In any case, the sanction of drawback under Rule 6 has attained finality. No review of the drawback already sanctioned has been done in the present case. Hence recovery of drawback already determined, sanctioned without reviewing/challenging the order passed under Section 51 of the Act, on the shipping bills is not sustainable. Similarly, the orders fixing the drawback and the orders sanctioning the drawback have also not been reviewed or challenged. In other words, there is an order determining and sanctioning the drawback in the present case, alb ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... the basis of said brand rate letters, drawback was sanctioned to the respondent under Rule 6. Subsequently, it was observed by the Customs that the impugned goods were classified under 8408 and the same is mentioned in list of items eligible for AIR of drawback under Rule 3 of the said Drawback Rules, 1995, and that even if the respondent had to file application for brand rate of drawback, they were required to file the same under Rule 7 and not under Rule 6. On above ground, the original authority confirmed the demand of erroneously sanctioned drawback along with applicable interest. Commissioner (Appeals) decided the case in favour of respondent. Now, the applicant department has filed this revision application on grounds mentioned in para (4) above. 9. Government observes that the application for claim of drawback was filed by the respondent for brand rate of drawback under Rule 6 of the Drawback Rules, 1995. The respondent contended that though their goods were mentioned in list of items eligible for AIR of drawback under Rule (3), they were not entitled for availment of AIR in terms of para 7(b) of the Notification No. 36/2005-Cus. (N.T.), dated 2-5-2005, as amended. The ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... sub-para (b) of para (8) of the notes and conditions of the Notification No. 68/2011-Cus. (N.T.), dated 22-9-2011. It stipulates that the All Industry Rate of drawback is not available if the goods are exported in discharge of export obligation against Advance Licence except under certain conditions. It is clarified that in general, the benefits of All Industry Rates of duty drawback and Advance Licence Scheme are not available simultaneously. However, in such cases the exporter can always avail the brand rate of duty drawback under Rule 6 or Rule 7 of the Customs, Central Excise Duties and Service Tax Drawback Rules, 1995, as the case may be and subject to the conditions stipulated therein, for the duty paid inputs used in the manufacture of export goods." From perusal of above said Circular, it is ample clear that in case of non-availability of AIR of drawback simultaneously with advance license scheme, the exporter can avail benefit of brand rate of drawback under Rules 6 or Rule 7 of the Drawback Rules, 1995. 9.2 Government finds that in this case the respondent has filed brand rate of drawback under Rule 6 of the said Drawback Rules, 1995, while the department is conten ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... nce this information was available, the charge of misdeclaration, and suppression of facts is not sustainable. So there is no case of misdeclaration. 9.4 The respondent has relied upon letter dated 6-11-2006 from Deputy Secretary (DBK), New Delhi addressed to the Commissioner of Central Excise Delhi-II. The relevant paras 3, 4, 5, 5.1 and 6 of the said letter is as under : "3. After receipt of Assistant Commissioner (Drawback)'s letter the issue has been examined by the Board. As conveyed earlier the brand rate of duty drawback granted in terms of Rule 6 and 7 of the Drawback Rules in cases where the export product does not have any All Industry Rate of duty drawback or where the All Industry Rate of duty drawback notified is considered by the exporter as inadequate to compensate the duties or tax suffered on inputs used in the manufacture of export product. However, all the conditions and guidelines including the time limit prescribed for determination of drawback rate are the same for the claims made under Rule 6 & Rule 7 of the said Rules. 4. The Drawback Schedule 2005-2006 was notified aligning tariff items in the Schedule with those in the Customs tariff. In ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... plication was filed under Rule 6 and not under Rule 7. This clarification also made quite clear that the exporter is not to be deprived of the substantial benefit of reimbursement of duties suffered on inputs used in the manufacture of export products. 9.5 Government notes that applicant department has raised the issue regarding availment of Cenvat credit of some inputs, and para 4.14 of Foreign Trade Policy regarding exports under advance authorization. In this regard, Commissioner (Appeals) has examined the issue and given his finding in Order-in-Appeal as under : "The Appellants have obtained licence/advance authorization for import of various components as specified in SION No. C2026 and C2027, for manufacture and export of IC engines. The Appellant also informed that in the IC engines exported out of India, they would be using both duty paid and duty free inputs. Sl. No. 16 of Form ANF 4A requires the applicant to indicate details of other materials to be used in the export product and sought to be imported/procured from sources other than the licence, on which drawback benefit is to be availed (not to be filled if drawback benefits are not being claimed). The Appella ..... X X X X Extracts X X X X X X X X Extracts X X X X
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