Deemed export drawback: CENVAT credit does not bar customs-duty relief, and brand rate proof is unnecessary where AIR applies.

Deemed exports from a DTA unit to its own 100% EOU are eligible for drawback under the Foreign Trade Policy, and availing CENVAT credit does not bar drawback of the customs-duty component. The policy distinguishes the excise-duty element, which is unavailable where CENVAT credit has been taken, from the customs-duty component, which remains claimable. Where the All Industry Rate is available and the rate is the same with or without CENVAT credit, brand rate fixation and production of actual duty-paid documents are not required for the customs component; the contrary circular position was read down to that extent.

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Issues: (i) Whether a unit supplying goods as deemed exports to its own 100% EOU is entitled to duty drawback on the customs duty component despite availing CENVAT credit; (ii) Whether, where All Industry Rate of drawback is available and the rate for goods with and without CENVAT credit is the same, the claimant must still seek fixation of brand rate and produce actual duty-paid documents.

Issue (i): Whether a unit supplying goods as deemed exports to its own 100% EOU is entitled to duty drawback on the customs duty component despite availing CENVAT credit.

Analysis: Paragraphs 6.11(a), 8.2(b), 8.3(b), 8.4 and 8.5 of the Foreign Trade Policy 2009-2014 show that supplies from DTA to EOU are deemed exports and are eligible for drawback. Paragraph 8.5 differentiates between the excise-duty element, which is unavailable where CENVAT credit has been taken, and the customs-duty component, which remains eligible for deemed export drawback. The Handbook of Procedures makes the drawback rules applicable mutatis mutandis to deemed exports. The policy framework therefore supports drawback of the customs component even where CENVAT credit has been availed.

Conclusion: Yes. The claimant is entitled to drawback of the customs duty component on deemed exports even though CENVAT credit was availed.

Issue (ii): Whether, where All Industry Rate of drawback is available and the rate for goods with and without CENVAT credit is the same, the claimant must still seek fixation of brand rate and produce actual duty-paid documents.

Analysis: Paragraph 8.3.3 of the Handbook of Procedures permits brand rate fixation only where All Industry Rate is unavailable or inadequate. The drawback schedule and the notes to the Customs notifications clarify that if the rate under both columns is the same, the rate pertains only to the customs component and is available irrespective of availing CENVAT credit. In that situation, insisting on brand rate fixation and proof of actual duty suffered defeats the purpose of the All Industry Rate scheme and goes beyond the policy framework. The 2013 Circular was therefore required to be read down to that extent.

Conclusion: No. Brand rate fixation and actual duty-paid documents were not required for the customs duty component in the facts of the case.

Final Conclusion: The policy circular could not be applied to deny customs-duty drawback on deemed exports, and the connected rejection orders could not survive.

Ratio Decidendi: Where deemed exports are otherwise eligible for drawback and the applicable All Industry Rate specifically covers the customs component, availing CENVAT credit does not bar drawback of that customs component and cannot justify insisting on brand rate fixation or actual duty-paid evidence.

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