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TMI Blog2017 (10) TMI 365X X X X Extracts X X X X X X X X Extracts X X X X ..... d had submitted documents that they procured raw materials from the domestic tariff area Unit and had submitted claim for drawback - Manufactured products were exported abroad by Kariwala Industries and not by Kariwala Green Bags. If one looks at the proviso to Rule 34 carefully, one would find that the said proviso itself contemplates of transfer of goods from one unit to another in the same zone without payment of duty. Rule 30(15) also provides for transfer from one unit to the another in the same zone without filing of any Bill of Entry. It is clear from the records that there is no dispute with regard to the writ petitioner having procured duty paid raw materials from the Domestic Tariff Area into FSEZ or used such raw materials in the manufacture of goods within the zone. It is also the admitted fact that the finished goods were exported from the zone and export proceeds were realized in foreign currency. As such, the writ petitioner’s claim for drawback ought to have been granted treating payment for goods procured from Domestic Tariff Area in foreign currency from the current account to which the foreign currency export proceeds to Unit-III were credited, considering ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ed proceeding thereunder and/or relating thereto and/or in pursuance thereof so that the same may be quashed and/or set aside and conscionable justice might be rendered. It is stated that the petitioner is primarily engaged in the production and export of industrial wear, beach wear, jute bags. The petitioner set up two Units in the Falta Special Economic Zone (hereinafter referred to as FSEZ) for the purpose of manufacturing and producing such goods and thereafter exporting the same to various countries. Vide letter dated July 28, 2005, the petitioner sought permission from the respondent no.1 to set up a third Unit at the FSEZ in order to manufacture jute bags, cotton bags, jute fabric and so on. By a letter dated August 1, 2005 the respondent no.1 granted permission to M/s. Kariwala Green Bags as Unit-III of the writ petitioner company for setting up a Unit under the FSEZ scheme for manufacture and export of (1) jute bag, (2) cotton bag, (3) cotton pareo, (4) polyester pareo, (5) viscose pareo, (6) silk made up, (7) hat, (8) eva slipper, (9) jute fabric. Incidentally, the first Unit of the petitioner was set up in terms of letter of permission dated November 19, 1992 an ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... the domestic tariff area Unit. At the time of making such transfer, the bank debited the current account used for domestic tariff Unit converted the amount into foreign currency. As a next step, the foreign currency was converted into Indian currency at the time to credit the same amount. This is reflected from the bank s letter dated June 6, 2011 which has been annexed to the writ petition and paragraphs 2(a) and (b) of the affidavit of Reserve Bank of India read with letter dated April 18, 2011 of State Bank of Bikaner and Jaipur addressed to the Superintendent of Customs. The other documents which have been referred to and relied upon by the petitioner in this regard are the letter dated May 14, 2011 of the Superintendent of Customs to Reserve Bank of India and the letter dated July 22, 2011 to the Superintendent of Customs as well as the letter dated July 9, 2011 of the State Bank of Bikaner and Jaipur to Reserve Bank of India. By an order in original dated August 9, 2011, the Assistant Commissioner of Customs rejected the claim of drawback primarily on the following grounds :- (i) M/s. Kariwala Green Bags, Falta Special Economic Zone and Kariwala Industries Ltd., Falta S ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ondition of rule 30(8) and payment in foreign currency from a current account did not satisfy the requirement of rule 30(8). This order dated May 28, 2013, is the subject matter of challenge in the instant writ petition. The following two questions arise for consideration in the facts of the instant case:- (i) Whether there was violation of Rules 22(2) and 34 of the Rules because according to the Customs Authorities, the duty paid raw materials were brought into one unit in the Zone but finished goods were manufactured and exported from another unit in the Zone? (ii) Whether there was violation of Rule 30(8) of the Rules because payment for the duty paid raw materials in foreign currency was made from a current account and not a foreign currency account? Before proceeding to answer the two questions, it is necessary to advert to the case sought to be made out before this Court on behalf of the respondent nos.3, 4 and 5, being the Customs Authorities. It is contended on behalf of the said respondents that Kariwala Green Bags is a separate legal entity under the law and had submitted documents that they procured raw materials from the domestic tariff area Unit ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ing the procedure established by law, the claim of Kariwala Green Bags cannot be granted and the challenged made at the instance of the writ petitioner, namely, Kariwala Industries Limited, is not maintainable in the eye of law. It is further stated that records show that the exports were made by Kariwala Industries. GR forms were submitted by Kariwala Industries for receiving foreign remittance, the foreign remittance earned by means of overseas export was received by Kariwala Industries and not by Kariwala Green Bags. The documents reveal that Kariwala Green Bags did not undertake any export of goods. Consequently, the drawback claim of Kariwala Green Bags is false since they are claiming drawback without undertaking any export. Kariwala Industries received the foreign currency in their own accounts and as such Kariwala Industries cannot state that they can receive the foreign currency in respect of another Unit and channelize the said foreign currency in another Unit account. In this regard, the respondent authorities have referred to the letter dated March 3, 2011 of Kariwala Green Bags wherein the company stated that the entire misunderstanding developed owing to unintentio ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ated cumulatively for a period of five years from the commencement of production. The respondent authorities have also referred to section 26(1)(d) read with section 26(2) of the SEZ Act which provides for admissibility of drawback for the goods procured from the domestic tariff area. The respondent authorities have also referred to section 50(2) of the Customs Act in order to contend that the exporter of any goods while presenting a shipping bill shall at the foot thereof make and subscribe to a declaration as regards the truth of its contents. It is specifically contended on behalf of the respondent authorities that using letters of permission of a different Unit showing exporter as another Unit tantamounted to deviation of truth and, thus, amounts to misdeclaration. Rule 30(8) of the said Rules, 2006 has been referred to in order to submit that drawback or duty entitlement passbook credit against supply of goods by domestic tariff area supplier shall be admissible provided payments for the supply are made from the Foreign Currency Accounts of the unit. The respondent authorities have also referred to Regulation 6A of the Foreign Exchange Management (Foreign Currency Account ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... Provided that unit and developers shall maintain such records for a period of seven years from the end of relevant financial year: Provided further that the unit engaged in both trading and manufacturing activities shall maintain separate records for trading and manufacturing activities. 30(8). Drawback or Duty Entitlement Pass Book credit against supply of goods by Domestic Tariff Area supplier shall be admissible provided payments for the supply are made from the Foreign Currency Account of the Unit. Provided that the reimbursement of duty in lieu of drawback or Duty Entitlement Pass Book credit against supply of goods by Domestic Tariff Area supplier to Special Economic Zone developers shall be admissible even if payment is made in Indian Rupees. Reimbursement of duty in lieu of drawback against supply of goods to Special Economic Zone developer shall be made as per the procedure prescribed by the Central Government. (15) A Unit or Developer may procure goods and services from another Unit located in the same or any other Special Economic Zone, subject to following conditions, namely:- (i) the receiving Unit or Developer shall file Bill of Entry for ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... and their consumption/utilization, production of goods and disposal by way of exports or sales in the domestic tariff area or transfer to Special Economic Zone or Export Oriented Unit or Electronic Hardware Technology Park or Software Technology Park Units or Bio- Technology Park Unit, as the case may be, and the balance in stock. Rule 30(8) provides for drawback or Duty Entitlement Pass Book credit against supply of goods by a Domestic Tariff Area supplier. It says that the same shall be admissible provided payments for the supply are made from the Foreign Currency Account of the unit provided that the reimbursement of duty in lieu of drawback or Duty Entitlement Pass Book credit against supply of goods by Domestic Tariff Area supplier to Special Economic Zone developers shall be admissible even if payment is made in Indian Rupees. Reimbursement of duty in lieu of drawback or Duty Entitlement Pass Book credit against supply of goods by Domestic Tariff Area supplier to Special Economic Zone developers shall be made as per the procedure prescribed by the Central Government. Rule 30(15) contains provisions for procurement of goods by a unit from another unit located in the same o ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... finding of the revisional authority regarding non-maintenance of records which would demonstrate utilization of raw materials brought into Unit-III by another Unit of the writ petitioner in the same zone is not in consonance with the findings in the Order-in-Original. Even if the raw materials brought into Unit-III were utilized in the manufacture of goods in another Unit of the writ petitioner in the zone and exported therefrom, having regard to the provisions of Rule 30(15)(v) and the proviso to Rule 34, it cannot be said that the writ petitioner had violated either Rule 22(2) or Rule 34. So far as the contention of the Customs Authorities with regard to Kariwala Green Bags and Kariwala Industries Limited being two separate companies is concerned, the same is factually incorrect. Kariwala Green Bags is only the name given by the corporate entity Kariwala Industries Limited to be a part of its business and there is no existence of a separate company by the name of Kariwala Green Bags. The letter of permission dated 1st August, 2005 issued in respect of Kariwala Green Bags which was referred to by the Customs Authorities clearly mentions that it is the Unit-III of Kariwala Indu ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... other benefits shall be granted to the developer or entrepreneur under sub-section (1). The statutory definition of the word prescribed can be found under clause (w) of section 2 of the SEZ Act which reads as follows :- (w) prescribed means prescribed by rules made by the Central Government under this Act; The Rule containing the terms and conditions adverted to in sub-section (2) of section 26 of the SEZ Act is Rule 22 of the said Rules. The said Rule 22 provides for the terms and conditions for availing exemptions, drawbacks and concessions to every developer and entrepreneur for authorized operations. There is no provision in the said Rule 22 which stipulates payment for goods procured from Domestic Tariff Area from a Foreign Currency Account. Rule 30 of the said Rules provides for procedure for procurements of goods from the Domestic Tariff Area. Sub-rule (8) of Rule 30 of the said Rules which has been quoted hereinbefore thus makes it clear that payment from Foreign Currency Accounts is a matter of procedure only. It is the admitted position that at the material period the writ petitioner did not maintain a Foreign Currency Account. However, it can be said th ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... n. Simply because a unit has not opened a Foreign Currency Account as provided under the said Regulation, neither realization of the export proceeds become invalid nor can the actual receipt of foreign currency be either ignored or dismissed. It is clear from the records that there is no dispute with regard to the writ petitioner having procured duty paid raw materials from the Domestic Tariff Area into FSEZ or used such raw materials in the manufacture of goods within the zone. It is also the admitted fact that the finished goods were exported from the zone and export proceeds were realized in foreign currency. As such, the writ petitioner s claim for drawback ought to have been granted treating payment for goods procured from Domestic Tariff Area in foreign currency from the current account to which the foreign currency export proceeds to Unit-III were credited, considering the same to be substantial compliance of Rule 30(8) of the said Rules. In such circumstances as stated above, the writ petition is allowed upon setting aside the Revisional order dated 28th May, 2013 with a direction upon the concerned respondent authorities to allow the drawback claim of the writ petiti ..... X X X X Extracts X X X X X X X X Extracts X X X X
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