Duty drawback limits for merchant exporters depend on non-availment of Cenvat credit in manufacture of export goods.

Merchant exporters seeking the higher All Industry Rate of duty drawback had to satisfy the condition that no Cenvat facility was availed for inputs or input services used in manufacture of the exported goods. The clarification in Circular No. 16/2009-Cus. applied to merchant exporters buying goods from traders in the local market on the assumption that such goods were duty paid. Here, the goods were purchased directly from the manufacturer, who had availed Cenvat credit on inputs. That factual position meant the drawback condition was not met, so the excise component of the higher drawback was not available and recovery of excess drawback was upheld.

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Issues: (i) Whether merchant exporters who exported goods purchased directly from a manufacturer, where the manufacturer had availed Cenvat credit in relation to the inputs used, were entitled to the higher All Industry Rate of duty drawback including the excise component.

Analysis: The clarification in Circular No. 16/2009-Cus. was directed to merchant exporters purchasing goods from traders in the local market, on the presumption that such goods were duty paid. The notification governing the drawback rate required the exporter to establish that no Cenvat facility had been availed for any inputs or input services used in the manufacture of the export products. On the facts, the export goods were procured directly from the manufacturer, and the manufacturer had availed Cenvat credit. The condition attached to the higher drawback rate was therefore not satisfied.

Conclusion: The appellants were not entitled to the excise portion of the All Industry Rate of duty drawback, and the recovery ordered in respect of the excess drawback was upheld.

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