Industry rate drawback cannot be denied when duty-free inputs lose identity during manufacture of export goods.

An industry rate of drawback cannot be denied merely because a fraction of duty-free imported raw material lost its identity during manufacture, where the exported goods were produced from a mixed input stream of duty-free imported and duty-paid domestic inputs. The prescribed drawback rate is treated as accounting for the composition of exempted and dutiable inputs used in the industry, and mere use of some duty-free material does not defeat entitlement once export requirements are satisfied. Repayment of drawback on that ground was therefore unsustainable, and the drawback benefit was maintained.

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Issues: Whether drawback could be denied or recovered merely because a fraction of duty-free imported raw material used in dyeing lost its identity in the manufacturing process, where the exported goods were manufactured using both duty-free imported inputs and duty-paid domestic inputs.

Analysis: The exported goods were manufactured from a mixed input stream consisting of duty-free imported raw materials and excise duty-paid domestic raw materials. The duty-free material used in dyeing lost its identity during processing, but that circumstance did not justify dissecting the drawback scheme to deny the industry rate of drawback. The prescribed drawback rate already reflects the composition of exempted and dutiable inputs used in the industry, and the mere use of some duty-free material in manufacture does not defeat entitlement where export obligation has been fulfilled.

Conclusion: The drawback claim could not be denied on the stated ground, and the appellant was entitled to succeed.

Final Conclusion: The demand to repay the drawback was unsustainable, and the appeal was allowed with the drawback benefit maintained.

Ratio Decidendi: Where an industry rate of drawback is prescribed and exported goods are manufactured using both duty-free and duty-paid inputs, drawback cannot be denied merely because a portion of duty-free input loses identity during manufacture, absent a case that the export was made only from duty-free goods.

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