Inadvertent CENVAT credit reversal before notice can preserve entitlement to higher duty drawback under the export scheme.

Incentive drawback provisions should not be applied hyper-technically where CENVAT credit was taken inadvertently and reversed with interest before issuance of a show cause notice. The Court treated the prompt reversal as neutralising the earlier availment for the purpose of the export drawback scheme and held that such corrected error could not be used to deny the higher rate of duty drawback. The petitioner was therefore found entitled to the higher drawback applicable during the relevant period, and the revisional order was set aside.

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Issues: Whether inadvertent availment of CENVAT credit, followed by reversal of such credit with interest before issuance of show cause notice, disentitles the exporter from the higher rate of duty drawback on the ground that CENVAT credit had been availed.

Analysis: The claim for higher drawback was rejected only because CENVAT credit had initially been taken. The credit, however, was reversed along with interest before any show cause notice was issued. The Court treated the reversal as effacing the earlier availment for the purpose of the drawback scheme. It also noted that drawback provisions are export promotion measures and should not be applied in a hyper-technical manner where the mistake was inadvertent and corrected promptly.

Conclusion: The petitioner was held entitled to the higher rate of duty drawback prevailing during the relevant period.

Final Conclusion: The impugned revisional order was set aside and the writ petition was allowed, resulting in recognition of the petitioner's entitlement to the appropriate higher duty drawback.

Ratio Decidendi: Where CENVAT credit is inadvertently availed but is reversed with interest before issuance of a show cause notice, the credit cannot be treated as effectively availed for denying higher duty drawback.

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