Pharma exporter wins duty drawback case under Foreign Trade Policy 2009-2014

The court held that the petitioner, a pharmaceutical manufacturer and exporter, was entitled to duty drawback on the customs duty component for deemed exports despite claiming cenvat credit. It was established that duty drawback could be claimed under the Foreign Trade Policy 2009-2014 for goods manufactured in India. The court also ruled that duty drawback based on All Industry Rates could be claimed without furnishing evidence of actual duty suffered on inputs, quashing orders that rejected the petitioner's claims based on an additional requirement imposed by a 2013 Circular. The court set aside the impugned orders and disposed of the writ petition in favor of the petitioner.

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Issues Involved:
1. Entitlement to duty drawback on customs duty component against deemed exports where cenvat credit is claimed.
2. Requirement to furnish evidence of actual duty suffered on imported or indigenous inputs for claiming duty drawback based on All Industry Rates (AIR).
3. Validity of Policy Circular No.9(RE-2013)/2009-14 dated 30.10.2013.
4. Legality of orders dated 26.04.2016 and 17.11.2016 by Deputy Development Commissioner and Deputy Director General of Foreign Trade.

Issue-wise Detailed Analysis:

1. Entitlement to Duty Drawback on Customs Duty Component:
The petitioner, a manufacturer and exporter of pharmaceutical products, converted its Domestic Tariff Area (DTA) unit into a 100% Export Oriented Unit (EOU) on 28.09.2012. Post-conversion, the petitioner claimed duty drawback on the customs duty component for deemed exports. The central issue was whether the petitioner was entitled to this duty drawback despite having claimed cenvat credit. It was established that deemed exports, including supplies from DTA to EOU, are eligible for duty drawback under the Foreign Trade Policy (FTP) 2009-2014, provided the goods are manufactured in India.

2. Requirement to Furnish Evidence of Actual Duty Suffered:
The petitioner argued that it was entitled to claim duty drawback based on AIR without furnishing evidence of actual duty suffered on inputs. The court noted that the FTP and Handbook of Procedures (HBP) allow for duty drawback on customs duty paid on inputs/components even if cenvat credit is availed. The court found that the All Industry Rate (AIR) for duty drawback is available for the goods in question, and the rate is the same whether cenvat credit is availed or not, indicating that the customs duty component can be claimed without additional documentation.

3. Validity of Policy Circular No.9(RE-2013)/2009-14:
The 2013 Circular required the fixation of a brand rate based on actual duty-paid documents for claiming duty drawback on the customs duty component. The court held that this requirement was beyond the provisions of the FTP and HBP, which do not mandate such documentation when AIR is available. Therefore, the court read down the 2013 Circular to the extent that it imposed this additional requirement.

4. Legality of Orders Dated 26.04.2016 and 17.11.2016:
The orders dated 26.04.2016 and 17.11.2016, which rejected the petitioner's claims based on the 2013 Circular, were found unsustainable in law. The court quashed these orders, stating that they were based on an incorrect interpretation of the FTP and HBP. The court emphasized that duty drawback on the customs duty component should be granted based on AIR without requiring proof of actual duty suffered.

Conclusion:
The court concluded that the petitioner is entitled to duty drawback on the customs duty component based on AIR without the need for brand rate fixation or additional documentation. The 2013 Circular was read down, and the impugned orders dated 26.04.2016 and 17.11.2016 were set aside. The writ petition was disposed of accordingly, with each party bearing its own costs.

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