Drawback not admissible where export goods were made from duty-free indigenous inputs, despite an All Industry Rate.

Drawback under the export incentive rules is meant to neutralise duty incidence on inputs used in exported goods, but it is not admissible where the evidence shows that the goods were manufactured from indigenous natural rubber that had suffered no duty at all. The availability of an All Industry Rate did not override this statutory bar, because such rates are based on industry averages and do not permit drawback where there was no actual duty incidence on the material constituting the major part of the export product. The denial of the drawback claim was upheld.

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Issues: Whether drawback was admissible where the export goods were manufactured using indigenous natural rubber that had not suffered duty, notwithstanding the availability of an All Industry Rate in the Drawback Schedule.

Analysis: Drawback is intended to neutralise duty incidence on materials used in the export product. An All Industry Rate is fixed on the basis of industry averages and ordinarily does not require the field formation to verify the actual duty suffered on every input. However, where the evidence shows that the export product was manufactured from inputs that had not suffered any duty at all, the statutory bar under the drawback rules is attracted. The court held that the appellant's reliance on the All Industry Rate and the departmental circular was misplaced because the case was not one of mere variation in duty incidence but one of absence of duty incidence on the material constituting the major part of the export product.

Conclusion: Drawback was not admissible and the denial of the drawback claim was upheld.

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