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TMI Blog2025 (1) TMI 636X X X X Extracts X X X X X X X X Extracts X X X X ..... ule 7 of the Customs and Central Excise Duties Drawback Rules, 2017 (notified vide Notification No. 88/2017, dated 21st September 2017) for goods manufactured in the MOOWR premises (Manufacturing and Other Operations in Warehouse Regulations, 2019) and exported therefrom? (ii) If yes, whether there is a requirement that there should be import of duty paid raw materials consumed for manufacture of exported goods. Whether duty drawback would be available on goods exported by BSCL if the corresponding raw materials are procured without payment of customs duty and also for domestic procurement on payment of GST? (iii) Whether BSL (as merchant exporter) can claim Duty Drawback under Rule 6/Rule 7 of the Customs and Central Excise Duties Drawback Rules, 2017 on export of goods manufactured by BSCL. (a MOOWR unit)? (iv) If yes, whether there is a requirement that there should be import of duty paid raw materials consumed for manufacture of exported goods. Whether Duty Drawback under Rule 6/Rule 7, as above, would be available on goods exported by BSCL if the corresponding raw materials are procured without payment of customs duty and also for domestic procurement on payment of ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ant is also contemplating import of raw materials under advance authorization. The Applicant believes that it is eligible to use Advance Authorization scheme for import of raw materials into the MOOWR unit which would be used for manufacture of finished goods and thereafter exported by BSCL or BSL to fulfil the export obligation. The Applicant is also contemplating to debond certain capital goods on which the benefit of deferral of customs duty for import of capital goods has been claimed under the MOOWR Scheme. The Applicant believes that it can debond the capital goods warehoused into the MOOWR unit by using EPCG authorization. 3. Statement of the applicant containing its interpretation of law and/or facts, as the case may be, in respect of the questions on which advance ruling is required is submitted by the applicant as follows : 3.1 The applicant proposes to have a new model of export of goods from the MOOWR premises and would like to confirm the eligibility of duty drawback for goods manufactured and exported from the said premises. The rates of drawback at present have been notified under Notification No. 7 of 2020 dated 28-1-2020 read with Customs and Central Excise Dutie ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... licant in the said application) and thereafter exported by BSCL or BSL to fulfil the export obligation, further, EPCG Scheme allows import of capital goods for pre-production, production and post-production at zero customs duty. Capital goods imported under EPCG Authorization for physical exports are also exempt from IGST and Compensation Cess, as provided in the notification issued by Department of Revenue. The Applicant believes that it can debond the capital goods warehoused into the MOOWR unit by using EPCG authorization. 3.3 The applicant has submitted that Section 75 of the Customs Act read with The Customs and Central Excise Duties and Drawback Rules, 2017 (the Duty Drawback Rules) provide for Duty Drawback of imported material used in the manufacture of exported goods. As per Section 75 of the Customs Act, read with the Duty Drawback Rules, there are 3 different ways of claiming Duty Drawback : (i) Draw Back as per All Industry Rate of Duty Drawback (as per Rule 3 and Rule 4 of the Duly Drawback Rules) (ii) Draw Back as per Brand rate (Rule 6 of the Duty Drawback Rules) (iii) Drawback as per Special Brand Rate (Rule 7 of the Duty Drawback Rules) As ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ase an exporter is exporting the aforesaid goods from more than one place of export, he shall apply to the Principal Commissioner or Commissioner of Customs, having jurisdiction over any one of the said places of export; (ii) the Assistant Commissioner of Customs or Deputy Commissioner of Customs, as the case may be, may extend the aforesaid period of three months by a period of three months and the Principal Commissioner of Customs or Commissioner of Customs, as the case may be, may further extend the period by a period of six months; (iii) the Assistant Commissioner of Customs or Deputy Commissioner of Customs or Principal Commissioner of Customs or Commissioner of Customs, as the case may be, may, on an application and after making such enquiry as he thinks fit, grant extension or refuse to grant extension after recording in writing the reasons for such refusal; (iv) an application fee equivalent to 1% of the FOB value of exports or one thousand rupees whichever is less, shall be payable for applying for grant of extension to the Assistant Commissioner of Customs or Deputy Commissioner of Customs, as the case may be and an application fee of 2% of the FOB value ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... tend the period by a period of six months; (iii) the Assistant Commissioner of Customs or Deputy Commissioner of Customs or Principal Commissioner of Customs or Commissioner of Customs, as the case may be, may, on an application and after making such enquiry as he thinks fit, grant extension or refuse to grant extension after recording in writing the reasons for such refusal; (iv) an application fee equivalent to 1% of the FOB value of exports or one thousand rupees whichever is less, shall be payable for applying for grant of extension to the Assistant Commissioner of Customs or Deputy Commissioner of Customs, as the case may be and an application fee of 2% of the FOB value or two thousand rupees whichever is less, shall be payable for applying for grant of extension by the Principal Commissioner of Customs or Commissioner of Customs, as the case may be. 3.6 Further, the applicant has relied upon the following judgments : * M/s. First Garments Manufacturing (India) (P.) Ltd. v. Joint Secretary to the Government of India, Ministry of Finance (Madras High Court W.P. (MD) No. 5674 of 2007) [2016 (344) E.L.T. 67 (Mad.)] * Leela Scottish Lace Ltd. v Commr. of Customs - 2003 ( ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... orted. The Circular further informs that DTA exporters will be eligible for payment of Brand Rate of Drawback. 3.8 The applicant has further made a reference to Para 9 of Circular No. 48/2011-Cus., dated 31 October 2011, where it has been clarified as follows : "9. Doubts have been expressed regarding simultaneous availment of benefits under Advance License/Advance Authorization Scheme along with All Industry Rates of duty drawback. In this regard attention is invited to the 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 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... levant extract of the clarification is as below : "17. Can all export benefits under FTP and Customs (Import of Goods at Concessional Rate of Duty) Rules, 2017 (IGCR) be taken in Bonded warehouse simultaneously? Response: The eligibility to export benefits under F'FP or IGCR would depend upon the respective scheme. If the Scheme allows, a unit operating under section 65 has no impact on eligibility. In other words, a unit operating under section 65 can avail of any other benefit, if the benefits scheme allows. 'The applicant submits that given the above and the fact that there is no restriction for use of EPCG license to pay duty of goods debonded from MOOWR premises under the MOOWR Regulations, the Applicant can apply for EPCG license and debond the capital goods imported under the MOOWR license by utilizing the said EPCG license for payment of customs duty on such debonding of capital goods. 3.12 Further, the applicant draws reference to the provisions of 'Third Party Exports' contained in FTP 2023 - Para 2.42 of FTP 2023 : Third Party Exports Third party exports (except Deemed Export) as defined in Chapter 11 shall be allowed under FTP. In such cases, export documents ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... the questions asked by the applicant reproduced (supra) in para 1 should be 'Yes'. 4. The concerned jurisdictional Customs Commissionerate i.e. the Commissioner of Customs (Preventive), Vijaywada has responded to the subject application vide letters dated 18-10-2023 as below: 4.1 The Units operating under Section 65 read with Section 58 of the Customs Act are entitled to import capital goods, machinery, inputs etc. without payment of duty or deferred payment of duty by following the provisions under Chapter IX. Insofar as domestic procurement is concerned, applicable rates of taxes shall be payable and exemptions, if any, can also be availed. By virtue of simply being a unit operating under Section 65, they shall not be entitled to procure goods domestically without payment of taxes. 4.2 Since the warehouse operating under Section 65 also functions as a warehouse licensed under Section 58, the licensee can clear imported goods as such into DTA or for home consumption under Section 68 only on payment of import duties along with interest as per sub-section (2) of Section 61 of the Act or clear them as such for export under Section 69 of the Act. Depreciation of the duties for calc ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... conditions stipulated in the said notification are fulfilled by the Applicant. Applicant further states that it is in a position to comply with all conditions prescribed under Notification No. 26/2023-Customs, dated 1st April 2023 at the time of debonding of capital goods from MOOWR Scheme and therefore there is no reason as to why the benefit should be denied to the Applicant. The Notification No. 26/2023 is an exemption notification and it is trite that any exemption notification should be construed strictly at the threshold. The Hon'ble Supreme Court in the case of Union of India v. Wood Papers Limited, (1990) 4 SCC 256 made a distinction between stage of finding out the eligibility to seek exemption and stage of applying the nature of exemption. Relying on the decision in Collector of Central Excise v. Parle Exports (P.) Ltd., (1989) 1 SCC 345, it was held "Do not extend or widen the ambit at the stage of applicability. But once that hurdle is crossed, construe it liberally". This decision has been relied upon and approved by the Hon'ble Supreme Court in the case of Dilip Kumar & Company, 2018 (361) E.L.T. 577 (S.C) 5.2 The applicant said that from the CBIC clarificatio ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... manufacturing of their final product and also if they want to claim duty drawback benefits on the duty paid inputs used in the manufacture of their resultant products, they can do it, but only after debonding of capital goods already received under MOOWR Scheme by paying all the applicable duties along with interest without claiming any depreciation of the Capital goods used thereof and also only after surrendering/Cancellation of their MOOWR Licence. Basically the concept of MOOWR Scheme is "Deferment of duty payment" i.e., Units operating under MOOWR Scheme can keep the imported goods either Capital goods or raw materials in their factory as long as they want without any time restriction. But, if they want to clear the goods in Domestic Tariff Area, they have to pay all the applicable Customs duties that were foregone at the time of import of the goods and no duties are to be paid for export of the same. The applicant's unit operating under MOOWR Scheme is termed as a DTA unit only for all practical reasons and purposes and it is not an SEZ or 100% EOU. Therefore, the manufactured goods supplied/cleared by them to their customers would come under category of DTA Sale only. 7. O ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... owmya Nuthalapati who reiterated their written submission provided on 27-12-2023 and 18-10-2023 and submitted that schemes cited by the applicant are independent schemes and cannot be clubbed. The representatives of the applicant reiterated the case laws already cited in the application. 9. I have taken into consideration all the materials placed on record in respect of the subject (08) questions including submissions made by the applicant during the course of both the personal hearings. I have gone through the submissions received from the jurisdictional Commissionerate and the rebuttals to that filed by the applicant. I therefore proceed to decide the present application and to answer all the (08) questions asked by the applicant on the basis of the information on record as well as the existing legal framework. 10. I have gone through the questions No. (i) to (v) reproduced (supra) and it is observed that these five (05) questions are asked in respect of 'duty drawback'. Observations, discussions and findings of this authority, in this regard, are as follows from paras 10.1 to 10.10: 10.1 First and foremost, it is pertinent to examine whether any such jurisdiction of pronounci ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ms Tariff Act; (e) determination of origin of the goods in terms of the rules notified under the Customs Tariff Act, 1975 and matters relating thereto. (f) any other matter as the Central Government may, by notification, specify. 10.4 As is clear from the applicant's questions No. (i) to (v) reproduced (supra) the matter does not pertain to classification of goods under the Customs Tariff Act, 1975 or to the grant of exemptions of duty under Section 25(1) of the Customs Act, 1962 and these questions are neither concerned with the valuation nor with origin of imported goods. In plain meaning, the issue also does not pertain to applicability of notifications issued in respect of tax or duties under this Act or the Customs Tariff Act, 1975 or any tax or duty chargeable under any other law for the time being in force in the same manner as duty of customs leviable under this Act or the Customs Tariff Act, 1975. However, in view of the clause (f) reproduced above, during the personal hearings representatives of the applicant were asked, if there is any notification which have specified other questions under the purview of this Authority, for that their reply was in ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... at the term duty is defined under Customs Act, 1962 as per follows : "2. Definitions In this Act, unless the context otherwise requires - (15) "duty" means a duty of customs leviable under this Act". [Emphasis Supplied] 10.6 On the other hand, drawback is defined under section 2(a) of the Drawback Rules, 2017 as : '2.(a) "drawback" in relation to any goods manufactured in India and exported, means the rebate of duty excluding integrated tax leviable under sub-section (7) and compensation cess leviable under sub-section (9) respectively of section 3 of the Customs Tariff Act, 1975 (51 of 1975) chargeable on any imported materials or excisable goods used in the manufacture of such goods.' From this definition of drawback, it is amply clear that drawback is a rebate of duty and it is not a levy of duty, whereas, clause (15) of section 2 of the Customs Act, 1962 defines 'duty' as a duty of customs leviable under this Act. 10.7 The provision relating to the refund of duty is specifically provided under the express provision of Section 27 of the Customs Act, 1962. Proviso to sub-section (2) of Section 27 under the Act reads as follows : "PROVIDED that the amount of ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... duty is enumerated under Section 25 of the Customs Act, 1962. Exemption is a kind of reduction or removal of compulsory duty leviable that would otherwise be imposed on import/export and any question related to this aspect is specifically covered under clause (b) of the sub-section (2) of Section 28(H) of the Customs Act, 1962, whereas, the words refund/rebate/drawback are not expressly envisaged under the provision of the Section 28(H)(2)(d) of the Custom Act inasmuch as all the provisions here are related to the questions having a bearing on rate of duty leviable on import/export. The terms used 'leviable' and 'payable' are differently constructed and are not interchangeable and cannot misunderstood to be one and the same, neither the same is the intention of the Government. Further, the primary rule of constructing statutes is to construct its provisions literally and grammatically giving the words their ordinary and natural meaning. According to this cardinal rule the words, phrases and sentences of the statutes are to be understood in their natural, ordinary or popular and grammatical meaning, unless such a construction leads to an absurdity or the statute suggests a differen ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... on is a nullity. 10.10 In view of the above discussions and provisions, I have arrived at the conclusion that the questions Nos. (i) to (v) (reproduced supra) involved in the present application do not fall within the ambit of any parameter, on which Advance Ruling can be sought. 11. I have gone through the Circular No. 34/2019-Cus., dated 1st October 2019 issued under F. No. 473/03/2015 -LC (pt). and para 14 thereof is reproduced as under for ready reference : "14. The issue of procurement of imported goods that are exempt from duty or are chargeable to nil rate of duty into a warehouse operating under section 65 has also been raised. The objective of Section 65 is to enable manufacture and other operations in customs bonded warehouses. For this purpose, the units should be able to procure required raw materials, consumables, capital goods etc., imported or procured from domestic market. The goods may include dutiable goods, exempt goods or those chargeable to nil rate of duty. Denial of the facility to exempt goods or those chargeable to nil rate of duty, which may be required for manufacturing, would defeat the objective of Section 65. It is therefore clarified that imported ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... No. 26/2023-Customs, dated 1st April 2023 can be availed by the Applicant. 12.1 Further, I have also gone through the relevant chapters of the current Foreign Trade Policy (FTP) to decide the case at hand. Para 2.36 of the FTP is reproduced as under for ready reference : "2.36 Private/Public Bonded Warehouses for Imports : (a) Private/Public bonded warehouses may be set up in DTA as per rules, regulations and notifications issued under the Customs Act, 1962. Any person may import goods except prohibited items, arms and ammunition, hazardous waste and chemicals and warehouse them in such bonded warehouses. (b) Such goods may be cleared for home consumption in accordance with provisions of FTP and against Authorisation, wherever required. Customs duty as applicable shall be paid at the time of clearance of such goods. (c) The clearance of the warehoused goods shall be as per the provisions of the Customs Act, 1962." From the above, it is observed that goods 'warehoused' in 'Private/Public Bonded Warehouses' may be cleared for home consumption in accordance with provisions of FTP and against Authorisation, wherever required. Customs duty as applicable shall ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... , as per Section 2 of the Customs Act, 1962, 'warehoused goods' are defined as any goods which are deposited in a warehouse. From the above discussed provisions, it is amply clear that all the three warehouses are set up under different provisions of the Act and they have their own procedures. Public and Private Bonded warehouses are set up to only deposit the goods and not any manufacturing process or other operations are specifically provided in these two warehouses in relation to the goods warehoused therein, whereas, owner of the MOOWR units are allowed to carry on any manufacturing process or other operations in the MOOWR unit in relations to the goods warehoused therein. Therefore, the provisions of the Private Bonded warehouses licensed under Section 58 of the Act and Private Bonded warehouses licensed under both Section 58 and Section 65 are on different footings and cross utilisation of the benefits, granted to the owners of the such warehouses does not appear to be specifically provided in the statute. 12.3 From the above, it is observed that para 2.36 of the FTP is silent on the issue at hand. The applicant is contemplating to debond certain capital goods on which the ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... re specifically extends such duty exemption benefits to the capital goods on which the benefit of deferral of customs duty has already been claimed under the MOOWR Scheme. Moreover, response to FAQ No. 17 is also not supporting specifically the contention of the applicant on this particular aspect. I am of the view that the response to FAQ No. 17 has nowhere given clarification about the question asked in the present application inasmuch as this response does not cover the activity contemplated by the applicant as the applicant has already availed the benefits of deferral of customs duty on import of capital goods into its MOOWR unit. Further, the said response has also envisaged the condition 'if the benefit scheme allows', in this regard, I find that the Notification No. 26/2023-Customs, dated 1-4-2023 and relevant Chapter of the current FTP about EPCG Scheme have also nowhere specifically covered the activity contemplated by the applicant in the present application. I find that neither Notification No. 26/2023-Customs, dated 1-4-2023 nor Notification No. 21/2023, dated 1-4-2023, have anywhere specifically supported the understanding of the applicant with regard to question Nos ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ll shall indicate name of both manufacturing exporter/manufacturer and third-party exporter(s), e-Bank Realization Certificate (e-BRC) or export Realizations from RBI's EDPMS wherever available in DGFT IT Systems. Export Order and Invoice should be in the name of third-party exporter. 5.04 Export obligation : (b) For export of goods, EPCG Authorisation holder may export either directly or through third party(ies). Definition : 11.61 : "Third-party exports" means exports made by an exporter or manufacturer on behalf of another exporter(s). In such cases, export documents such as shipping bills shall indicate names of both manufacturer exporter/manufacturer and third party exporter(s). Bank Realisation Certificate (BRC), Self-Declaration Form (SDF), export order and invoice should be in the name of third party exporter. In view of the above, I find that Third-party exports are allowed under current FTP and para 2.42 (reproduced above) of current FTP substantiates this finding more specifically. Export, which are termed as Third-party exports, are allowed by an exporter or manufacturer on behalf of another exporter(s). 15. On the basis of foregoing discussions and findings, ..... X X X X Extracts X X X X X X X X Extracts X X X X
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