All Industry Rate drawback cannot be curtailed merely because inputs were procured against Form H

All Industry Rate drawback is computed on an average basis to reflect duty and tax incidence on exported goods, and it is governed by the Drawback Rules, 1995 and the applicable notifications. The notifications bar drawback only where the goods are manufactured or exported by availing rebate of duty on materials used in manufacture or under Rule 19(2) of the Central Excise Rules, 2002. Procurement of inputs against Form H is not equivalent to that condition, and it is not a notified disqualification. Field officers are not authorised to examine the duty-paid character of each input or reduce drawback on that basis. The stated restriction was therefore unsupported, and the entitlement to drawback at the All Industry Rate was restored.

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Issues: Whether All Industry Rate of drawback could be denied or restricted on the ground that packaging materials were procured without payment of duty from unregistered units against Form H, and whether field officers could examine the duty-paid character of individual inputs before sanctioning drawback.

Analysis: All Industry Rates of drawback are fixed on an average basis to reflect the incidence of duty and taxes on inputs and services used in exported goods, and their availability is governed by the Drawback Rules, 1995 and the applicable notifications. The relevant conditions in the notifications bar drawback only where the exported goods are manufactured or exported by availing rebate of duty on materials used in manufacture or in terms of Rule 19(2) of the Central Excise Rules, 2002. Procurement of inputs against Form H is not the same as manufacture or export under Rule 19(2), and that circumstance is not made a disqualification by the notifications. The field formation is also not conferred any authority under the Drawback Rules or the notifications to probe the duty-paid character of each input or to reduce the All Industry Rate on that basis. The restriction imposed by equating Form H procurement with Rule 19(2) was therefore not supported by the governing provisions.

Conclusion: The denial of drawback on packaging materials was unsustainable, and the drawback could not be restricted on the stated ground.

Final Conclusion: The appellate order was set aside and full relief was granted by restoring the applicant's entitlement to drawback at the All Industry Rate.

Ratio Decidendi: All Industry Rate drawback cannot be denied or curtailed on the basis of the duty-paid character of individual inputs unless the specific statutory notification condition is attracted, and procurement against Form H is not equivalent to manufacture or export under Rule 19(2) of the Central Excise Rules, 2002.

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