2012 (12) TMI 474 - AT - Customs

Tribunal Upholds Denial of Excise Duty Drawback, Emphasizes Revenue Protection

The Tribunal upheld the denial of the excise portion of duty drawback to the appellant for non-compliance with Drawback Rules, directing them to deposit ... Recovery of Drawback claim - stay - the appellant trader had purchased the goods for export under drawback claim from traders - whether the appellant in respect of their exports of RMG and scarves under drawback claim under Section 75 of Customs Act, 1962 at ‘all industry rate’ fixed under Rule 3 of the Drawback Rules, are eligible for full rate including excise portion or only the customs portion of the rate. – Held that:- It is only in the Board’s Circular No. 16/2009-Cus., dated 25-5-2009 that without any amendment to proviso to Rule 3 of the Drawback Rules, the Board totally reversed its stand with regard to grant of drawback at all industry rate to merchant exporters and clarified that full drawback including Central Excise portion would be available to merchant exporter in respect of export of the goods purchased from open market, without production of any certificate regarding non-availment of input duty credit. The above circular of the Board, based on the preposition that the goods purchased from the market are deemed to be duty paid and hence non-Cenvat credit availed, as when Cenvat credit is used by a manufacturer for payment of duty on goods cleared for home market, the same has been given back to the Government, is, in our view, totally wrong and contrary to the provisions of the law Since export was made under drawback claim and such claim was received by the appellant during period prior to 25-5-2009 and as per the Board’s instructions excise portion of drawback is not available in respect of goods exported by a Merchant exporter purchased from traders in the market, the appellant has been unjustly enriched. It has failed to establish a prima facie case in its favour making an unlawful claim. Therefore the claim was contrary to the statutory provisions of the Rule 3 of the Drawback Rules. In terms of provisions of Section 129E, as discussed in para 6 to 6.2 above, pre-deposit of entire drawback unjustly availed must be paid back to treasury. The appellant, is therefore, directed to deposit entire duty drawback of Rs. 2,43,59,006/- (Rupees Two Crore Forty Three Lakh Fifty Nine Thousand and Six) already availed within a period of eight weeks from the date of pronouncement of this order. Issues Involved:1. Denial of excise portion of duty drawback.2. Violation of principles of natural justice.3. Applicability of Board's Circular No. 16/2009-Cus., dated 25-5-2009.4. Requirement of pre-deposit under Section 129E of Customs Act, 1962.5. Prima facie case for waiver of pre-deposit.Detailed Analysis:1. Denial of Excise Portion of Duty Drawback:The appellant, engaged in exporting readymade garments (RMGs) and scarves under drawback claims, faced denial of the excise portion of the drawback for 282 consignments exported between April 2006 and February 2008. The denial was based on the non-compliance with the conditions in the 1st proviso to Rule 3 of the Drawback Rules, as the goods were purchased from traders without certificates of non-availment of Cenvat credit by manufacturers. The Commissioner of Customs confirmed the drawback demand of Rs. 2,43,59,006/- along with interest and imposed a penalty of the same amount on the appellant firm under Sections 114(iii) and 114AA of the Customs Act, 1962.2. Violation of Principles of Natural Justice:The appellant argued that the impugned order violated principles of natural justice as it was passed without supplying requisite documents, allowing cross-examination of witnesses, or granting an opportunity for a personal hearing. They contended that the order was contrary to the Board's Circular No. 16/2009-Cus., which allowed full duty drawback to merchant exporters purchasing goods from the local market, provided certain declarations were made.3. Applicability of Board's Circular No. 16/2009-Cus., dated 25-5-2009:The appellant relied on the Board's Circular No. 16/2009-Cus., which stated that goods purchased from the market are deemed duty paid and eligible for full duty drawback. However, the respondent argued that this circular could not be applied retrospectively to exports made between April 2006 and February 2008, during which the earlier Circular No. 64/1998 was in force, restricting the benefit of all industry rates of duty drawback to the customs portion only for goods purchased from the open market.4. Requirement of Pre-Deposit under Section 129E of Customs Act, 1962:The Tribunal examined whether the requirement of pre-deposit of the duty drawback demand, interest, and penalty could be waived under the proviso to Section 129E of the Customs Act, 1962. The appellant argued that compliance with the pre-deposit requirement would cause undue hardship. The Tribunal noted that undue hardship exists when the hardship caused by the pre-deposit requirement is greater than warranted by the circumstances or disproportionate to the requirement itself.5. Prima Facie Case for Waiver of Pre-Deposit:The Tribunal evaluated whether the appellant had a prima facie case for waiver of pre-deposit. It noted that the appellant had failed to produce evidence of non-availment of Cenvat credit and that the Board's Circular No. 16/2009-Cus. could not be applied retrospectively. The Tribunal concluded that the appellant did not have a strong prima facie case and that granting a waiver would prejudice the interests of revenue.Conclusion:The Tribunal directed the appellant to deposit the entire duty drawback amount of Rs. 2,43,59,006/- within eight weeks, failing which the appeal would not be heard. Subject to compliance with this direction, the pre-deposit of the balance amount of interest and penalty was waived, and recovery thereof stayed during the pendency of the appeal. The Tribunal emphasized the importance of safeguarding the interests of revenue and preventing undue enrichment through unjust claims of duty drawback.