TaxTMI 
TaxTMI 
2011 (2) TMI 1078
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....nder entry No.54.04(b) which offered Central Excise drawback at the rate of 10.5% subject to a maximum of Rs.26.50 per kg. of polyester filament yarn content. In a show-cause notice dated 18.7.2001, the Deputy Commissioner of Customs (DBK) proposed to (a) reject the drawback claim, (b) hold the exported goods to be liable to confiscation under Section 113(i) of the Customs Act and (c) impose penalty under Section 114(iii) of the Act. The reasons stated for denial of drawback was that the input used in the manufacture of the exported product was grey fabric on which Central Excise duty/countervailing duty (CVD) was not payable and hence the appellant was not eligible for drawback. This ground for denial of drawback was raised with reference to clause (ii) of the second proviso to Rule 3 of the Customs and Central Excise Duties and Service Tax Drawback Rules, 1995, which reads as follows: "Provided further that no drawback shall be allowed" (i).... (ii) If the said goods are produced or manufactured using imported materials or excisable materials or taxable services in respect of which duties or taxes have not been paid..... The show-cause notice was con....
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....ant to a claim for drawback of Central Excise duty was whether the basic inputs like yarn, dyes etc. were duty-paid. Any Central Excise duty payable at intermediate stages of the manufacture of the above man-made fabrics was not relevant to the context. It was submitted that the grey fabrics used in the manufacture of the export goods had been manufactured out of yarn and other basic raw materials procured from the market. The Revenue did not have a case that the polyester filament yarn (PFY), which had gone into the manufacture of grey fabric, which was used in the manufacture of dyed/printed polyester fabric, was not duty-paid. Where the basic input (PFY) was duty-paid and no MODVAT credit of such duty was availed, there was no justification to reject the drawback claim. According to the learned counsel, the drawback claim satisfied the essential requirement of Rule 3 of the Customs and Central Excise Duties and Service Tax Drawback Rules, 1995. Therefore, he prayed for allowing the appeal. 3. The learned SDR argued in defence of the Commissioner's order. He submitted that, under DFRC-cum-Drawback Scheme where the import of input was m....
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.... under DFRC involving grey fabric as input. It was submitted that, in the present case, investigations revealed that grey fabric had been used as input in the manufacture of the exported product and, therefore, the appellant was not eligible for drawback. It was also pointed out by the SDR that the appellant did not challenge the Commissioner's finding that grey fabric was used as input in the manufacture of the exported product. Central Excise duty was not leviable on grey fabrics, nor did the appellant show that such duty was actually paid on the grey fabrics used in the manufacture of the exported product. Therefore, grant of drawback was barred by the second proviso to Rule 3(1) of the Customs and Central Excise Duties and Service Tax Drawback Rules, 1995. 4. In his rejoinder, the learned counsel reiterated that the shipping bills had been finally assessed by accepting the exporter's declaration that the exempted material used in the export goods was dyed polyester fabric and, therefore, the Revenue was precluded from taking a contrary view regarding the input used in the export goods. He submitted that the input used in the export goods was dyed poly....
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....ic. In actual practice, apparently, the appellant imported dyed polyester fabric under DFRC on payment of CVD and without payment of BCD and SAD by availing the benefit of Notification No.48/2000-Cus. ibid. Before this importation, they exported dyed & printed polyester fabrics under DFRC-cum-Drawback Scheme by declaring the input used therein to be dyed polyester fabric, and obtained DFRCs from the licensing authority on the strength of the finally assessed shipping bills. Drawback was claimed in Shipping Bills at "All Industry rate" prescribed in the relevant schedule of drawback rates. It is this claim which has been opposed on the strength of the second proviso to Rule 3(1) of the Customs and Central Excise Duties and Service Tax Drawback Rules, 1995, which says that no drawback shall be allowed if the export goods are produced or manufactured, using importer materials or excisable materials or taxable services in respect of which duties or taxes have not been paid. We find that the aforesaid plea of the counsel that the appellant had option to import either grey fabric or dyed fabric as replenishment for the material used as input in the exported product was ....