Drawback on exported inputs survives when finished goods are sold abroad and supplier non-registration does not by itself defeat the claim.

Drawback may remain available where exported inputs are traceably used in manufacturing finished goods sold abroad, and the claim is confined to the value of the exported inputs. Rule 16A of the Drawback Rules applies only when the relevant export proceeds are not realised; where sale proceeds are received for the finished garments and there is no inflated drawback claim, non-realisation is not established. Non-registration of supporting suppliers does not by itself defeat drawback, since exempt units may remain unregistered and entitlement may still subsist absent proof of inadmissible Cenvat credit or fraud. On this reasoning, rejection of drawback and penalty were not justified.

---

---

Issues: (i) Whether drawback was admissible on fabrics exported to job-workers in Bangladesh where the finished garments were ultimately sold to a third-country buyer and sale proceeds were received by the exporter; (ii) Whether non-registration of the supporting manufacturers with Central Excise authorities disentitled the exporter from drawback or justified denial of the claim and penalty.

Issue (i): Whether drawback was admissible on fabrics exported to job-workers in Bangladesh where the finished garments were ultimately sold to a third-country buyer and sale proceeds were received by the exporter.

Analysis: Rule 16A of the Customs, Central Excise and Service Tax Drawback Rules, 1995 applies where drawback is recoverable if sale proceeds are not realised. At the same time, Rule 12(1)(b) and Rule 13(2)(i) show that export need not always be against a sale invoice or letter of credit. The fabrics were exported as an identified input for garments, and the exporter received sale proceeds for the garments from the third-country buyer. The value on which drawback was claimed was only the value of the fabrics, not an inflated amount. On the factual matrix, the proceeds relating to the exported fabrics could not be treated as unrealised.

Conclusion: Drawback was admissible and Rule 16A was not attracted.

Issue (ii): Whether non-registration of the supporting manufacturers with Central Excise authorities disentitled the exporter from drawback or justified denial of the claim and penalty.

Analysis: Certificates from Central Excise authorities showing non-registration did not establish that the suppliers did not exist. An exempted unit may remain unregistered. The Board's Circular No. 16/2009-Customs dated 25.05.2009 also recognised entitlement to drawback in cases where goods are purchased from the local market, subject to declaration requirements. The materials did not show that inadmissible Cenvat credit had been taken or that any fraudulent device was adopted to claim drawback.

Conclusion: Non-registration of suppliers did not justify denial of drawback or penalty.

Final Conclusion: The rejection of drawback and the penalty were unsustainable, and the assessee was entitled to consequential relief.

Ratio Decidendi: Where exported goods are traceably used in the manufacture of finished goods sold abroad and the claimed drawback is confined to the value of the exported input, drawback cannot be denied merely because the intermediate job-worker transaction is not a sale or because supporting suppliers are unregistered, unless non-realisation or fraud is shown.

---