1993 (8) TMI 88 - CGOVT - Customs

Appellate Authority clarifies FOB value exclusion for labels in drawback calculation

The Appellate Authority remanded the case to determine if the FOB value of goods included the value of labels, ultimately deciding that the FOB value did ... Drawback Issues: Review of order-in-appeal No. 133/90 dated 12-10-1990The judgment pertains to two review proposals initiated by the Government based on the Collector of Customs, Bangalore's proposals for reviewing the order-in-appeal No. 133/90 dated 12-10-1990. The respondents contended that the Assistant Collector's order was arbitrary and lacked natural justice principles as no personal hearing opportunity was provided. They argued that affixing imported labels, supplied free of charge, was not a manufacturing activity under Rule 3(1) of the Customs and Central Excise Duty Drawback Rules, 1971. The Appellate Authority remanded the case to determine if the FOB value of goods included the value of the labels. The respondents claimed that the FOB value did not encompass the label cost. The judgment outlines the procedural history, including adjournment requests, and ultimately decides to base the review on the existing submissions. The case involved the export of goods claiming drawback under the Customs Act, 1962 and the Drawback Schedule. The original authority deducted the duty foregone on imported labels from the sanctioned drawback under Rule 3(1). The Appellate Authority upheld this decision but remanded for verification of label value inclusion in the FOB value. The Collector challenged this, arguing that duty deduction applies regardless of the label's source or inclusion in the FOB value.The judgment delves into the relevant provisions, including Rule 3(1) and Notification No. 150/80, emphasizing the impact of duty exemptions or rebates on drawback eligibility. It clarifies that the manner of payment for imported materials is immaterial for drawback purposes. The judgment supports the Collector's objection to segregating costing based on duty concessions, as it contravenes the first proviso of Rule 3(1). It asserts that drawback calculation should consider all inputs and related duties, preventing unfair advantage from cost segregation. Additionally, it establishes that affixing labels constitutes a manufacturing activity essential for marketability, justifying the application of Rule 3(1) by lower authorities. Consequently, the review proceedings succeed, setting aside the order-in-appeal and reinstating the order-in-original.