Drawback classification for cotton terry towels turns on the correct tariff entry, not a non-applicable circular or letter.

Cotton terry towels exported during the relevant period were treated as made-up articles made chiefly from textile materials not elsewhere specified for drawback purposes. The statutory drawback schedule, Section Note 5 to Section XI of the Customs Tariff Act, 1985, and the contemporaneous public notices and circulars supported that classification. A Ministry circular or earlier departmental letter that did not address the precise disputed entry could not sustain denial of drawback. On the facts, the departmental classification was unsustainable and the exports were eligible for drawback under the relevant n.e.s. entry, with consequential relief.

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Issues: Whether cotton terry towels exported during the relevant period were classifiable as made-up articles made chiefly from textile materials not elsewhere specified for drawback purposes, and whether the demand founded on the Ministry's circular/letter could be sustained.

Analysis: The goods were examined with reference to the drawback schedule, Section Note 5 to Section XI of the Customs Tariff Act, 1985, and the contemporaneous public notices and circulars. The record did not show any withdrawal of all industry rate drawback for terry towels in the public notice relied upon by the department, and the circular referred to in support of the demand did not govern the disputed classification issue. The earlier departmental letter was found not to answer the relevant classification question and could not be treated as a valid basis to deny drawback. On the facts, the exported cotton terry towels fell within the entry for made-up articles made chiefly from textile materials not elsewhere specified.

Conclusion: The classification adopted by the department was unsustainable, and the exports were held eligible for drawback under the relevant n.e.s. entry, in favour of the assessee.

Final Conclusion: The impugned orders were set aside and the revision application succeeded with consequential relief.

Ratio Decidendi: For drawback purposes, a circular or letter that does not address the precise classification entry in dispute cannot defeat the correct tariff classification of the goods on the basis of the statutory schedule and record facts.

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