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of <h1>Court rules hangers not tax-exempt for knitwear manufacturing</h1> <h3>ANANYA KNITTING COMPANY Versus JOINT SECRETARY</h3> The court dismissed the writ petitions, ruling that the petitioners were not entitled to claim tax benefits under Sl. No. 2704 as hangers are not ... Drawback – Appellant demanded for drawback claiming that the hangers were imported as one of the items as duty free under QBAL Scheme – Courts give direction to consider the case of petitioner under other scheme and calculate the tax as well as other duties whichever is liable Issues Involved:1. Entitlement to drawback duty under Note (II) of Sl. No. 2704 of the Customs and Central Excise Duties Drawback Rule, 1971.2. Classification of hangers as 'embellishment' under the Quantity Based Advance License Scheme.3. Consideration of the petitioner's case under alternative schemes for tax benefits.Detailed Analysis:1. Entitlement to Drawback Duty:The primary issue was whether the petitioner was entitled to drawback duty under Note (II) of Sl. No. 2704 of the Customs and Central Excise Duties Drawback Rule, 1971. The petitioner, a manufacturer of knit fabrics, imported hangers claiming they were for use as an integral part of the garment to sell to foreign buyers. The petitioner argued that the hangers should be considered an 'embellishment' under Note (II) and thus be duty-free. However, the respondents contended that hangers are not part of the garment and are not used in the manufacturing process of knitwear. The court held that the hangers could not be classified as embellishments for manufacturing knitwear, thereby denying the petitioner's claim for tax benefits under Sl. No. 2704.2. Classification of Hangers as 'Embellishment':The petitioner relied on the term 'embellishment' in Note (II) to claim that hangers should be duty-free under the Quantity Based Advance License Scheme. The court examined the definition of 'embellishment' and determined that it refers to items used to adorn or beautify the garment during the manufacturing process. The court concluded that hangers are used for displaying garments and not in their manufacture. Therefore, hangers do not qualify as embellishments under the scheme. The court emphasized that the policy permits the import of items used in manufacturing knitwear, not for any other purpose.3. Consideration Under Alternative Schemes:The petitioner argued that if the hangers could not be classified as embellishments, the case should be considered under alternative schemes, and they were prepared to pay the required duty. The appellate authority had rejected this plea, stating it was not raised at the initial stage. However, the court opined that the authorities could treat the petitioner's case under other schemes, considering the objective of encouraging exports and increasing foreign trade. The court directed the respondents to consider the petitioner's case under alternative schemes and calculate the applicable duties.Conclusion:The court dismissed the writ petitions, holding that the petitioners were not entitled to claim tax benefits under Sl. No. 2704 as hangers are not embellishments for use in manufacturing knitwear. However, the court directed the respondents to consider the petitioner's case under other schemes and calculate the applicable taxes and duties.
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