2022 (2) TMI 211 - AT - Customs

Tribunal rules on duty drawback interpretation under Customs Act, emphasizing material usage and procedural compliance

M/s. Best Fabrics Versus Commissioner of Customs, Chennai

The tribunal ruled in favor of the appellant, emphasizing the correct interpretation of Section 75 of the Customs Act, 1962. It held that duty drawback ... Duty Drawback - Advance Licences for Duty-free import of goods - drawback for 50% of FOB value - failure to discharge export obligation - Section 75 of the Customs Act, 1962 - HELD THAT:- Section 75 of the Customs Act, 1962 allows Duty drawback on the imported materials that were used in the manufacture of goods which are exported. Here in the case on hand, it is the case of the appellant that the appellant did not use the imported materials in the manufacture of the exported goods since the date of the Advance Licences were much later. In the statement of facts in the appeal memorandum, the appellant has given licence numbers along with dates - The requirement of Section 75 is the ‘use’ of the imported materials in the export of manufactured goods, which is seriously disputed by the appellant, which aspect has to be properly brought on record. There is also nothing on record as to whether the imported goods under the Advance Licences in question were actually seized, because the Order-in-Appeal refers to a different Advance Licence of a different date altogether. The benefit of Section 75 ibid namely the drawback should be allowed of duties of Customs chargeable under Customs Act cannot be denied as the benefit of duty drawback is allowable on the imported goods used in the manufacture of goods which are exported. Revenue has nowhere disputed the fact of export made by the appellant. Hence, the impugned order is contrary and not in accordance with the scheme of the statutory provision as provided under Section 75 ibid - there is no justification or logic in adopting the drawback for 50% of FOB value which is also not as per Section 75 ibid and by virtue of this also, the impugned order is a non-speaking order. The impugned order is not sustainable since the same is not in accordance with the letter and spirit of the provisions of Section 75 of the Customs Act, 1962 and hence, the matter is required to be remitted back to the file of the Commissioner for passing a fresh speaking order considering the observations and after giving sufficient opportunities to the appellant - Appeal allowed by way of remand. Issues:- Interpretation of Section 75 of the Customs Act, 1962 regarding duty drawback on imported materials used in exported goods.- Dispute over conversion of DEEC shipping bills into drawback shipping bills.- Applicability of Kar Vivad Samadhan Scheme (KVSS) settlement on duty payment.- Challenge to the Commissioner's decision on restricting drawback to 50% of FOB value.- Compliance with terms and conditions for allowing conversion of shipping bills.Analysis:1. Interpretation of Section 75 of the Customs Act, 1962: The appellant contended that the Commissioner erred in restricting the drawback to 50% of FOB value, arguing that duty paid under a scheme should be treated as a regular import. Reference was made to a previous appellate order highlighting the impact of seized goods on export obligations. The tribunal noted the requirement of using imported materials in exported goods, emphasizing the need for proper documentation and record of seized goods to determine eligibility for duty drawback under Section 75.2. Dispute over Conversion of Shipping Bills: The appellant's request for converting DEEC shipping bills into drawback shipping bills was initially rejected by the Commissioner, leading to a writ petition and subsequent High Court order for a fresh adjudication. The tribunal acknowledged the history of the dispute and the need for a speaking order based on merits, underscoring the importance of compliance with terms and conditions for such conversions.3. Applicability of Kar Vivad Samadhan Scheme (KVSS): The appellant had settled a previous dispute under the KVSS by paying 50% of the duty, which was acknowledged by a certificate from the competent authority. This settlement raised questions regarding the treatment of duty payment in subsequent export transactions and its impact on duty drawback claims, necessitating a comprehensive review of the settlement's implications.4. Challenge to the Commissioner's Decision: The tribunal scrutinized the Commissioner's decision to restrict the drawback to 50% of FOB value, finding it inconsistent with the requirements of Section 75 of the Customs Act. By referencing the lack of justification for this restriction and the absence of logic in the decision, the tribunal highlighted the need for a fresh speaking order aligning with statutory provisions and principles governing duty drawback claims.5. Compliance with Terms and Conditions: The tribunal emphasized the importance of adherence to terms and conditions for allowing conversion of shipping bills, signaling the need for meticulous scrutiny and procedural compliance in handling such requests. The decision to remit the matter back to the Commissioner for a fresh order underscored the significance of due process and thorough consideration of all relevant factors in resolving the dispute effectively.