TaxTMI 
TaxTMI 
2012 (12) TMI 474
X X X X Extracts X X X X
X X X X Extracts X X X X
....red to as the Drawback Rules), framed under Section 75 of the Customs Act, 1962, Section 37 of the Central Excise Act, 1944 and Section 93A read with Section 94 of the Finance Act, 1994. The rate of drawback fixed on the RMG and Scarves under Rule 3 of the Drawback Rules - called 'all industry rate', has two components - customs component and Central Excise and Service tax component (hereinafter referred to as excise component) and the same is available subject to the conditions prescribed in 1st and 2nd proviso to Rule 3(1) of the Drawback Rules. In this case, the excise portion of drawback is sought to be denied in respect of 282 consignments of RMGs/scarves exported during the period from April 2006 to February 2008 on the ground that the conditions prescribed in this regard in 1st proviso to Rule 3 of the Drawback Rules have not been satisfied, as the goods exported have been purchased from traders in the market and certificates regarding non-availment of Cenvat credit by the manufacturers of the goods exported have not been produced. Since the appellant had already received full drawback - including the excise portion, to which they did not appear to be entitled, a show ....
X X X X Extracts X X X X
X X X X Extracts X X X X
....nd they give a declaration that no rebate (input rebate and final product rebate) shall be taken in respect of the goods exported, that this Circular clearly states that the goods available in the market are deemed to be duty paid and even if it is assumed that Cenvat credit has been availed in respect of such goods, such Cenvat credit would have been used to pay the duty on final products cleared for home market and the Cenvat credit availed has, therefore, been given back to the Government when such goods were cleared for local market, that the appellant have complied with the conditions of Circular dated 25-5-2009 and therefore, there is no justification for denying the excise portion of the drawback, that Tribunal in a recent judgment (Order No. C/411/2011 dated 14-9-2011) in case of M/s. Kutlar Exports v. CC, New Delhi, relying upon the above-mentioned Board's Circular, has held that in respect of goods exported which had been purchased from traders In market, excise portion of drawback cannot be denied, that in view of Board's Circular and the Tribunal's judgment, no declaration regarding non-availment of input duty Cenvat credit is necessary for claiming full drawback (inclu....
X X X X Extracts X X X X
X X X X Extracts X X X X
....sonal hearing had been granted to the appellant on 31-1-2011 and prior to passing of the impugned order, inspection of entire records of investigation had been allowed, and subsequently another opportunity to make submission was granted on 25-7-2011, which was not availed by the appellant. Shri Singh, therefore, pleaded that the appellant do not have prima facie case and hence, this is not a case for waiver from the requirement of pre-deposit. 5. We have carefully considered the submissions from both the sides and perused the records. 6. The point to be decided is as to whether the requirement of pre-deposit of duty drawback demand, interest and penalty by the appellant in terms of the provisions of Section 129E which is a pre-condition for hearing of their appeal can be waived under proviso to this Section. In this regard, Section 129E is reproduced below :- "Section 129E : Deposit, pending appeal, of duty and interest demanded or penalty levied - where in any appeal under this chapter, the decision or order appealed against relates to any duty and interest demanded in respect of goods which are not under the control of the customs authorities or any penalty ....
X X X X Extracts X X X X
X X X X Extracts X X X X
....) hardship caused by the requirement of pre-deposit is greater than the circumstances warrant, is not merited by the conduct of the appellant or is very much disproportionate to it, or (ii) the particular burden to observe or perform the requirement, is out of proportion to the nature of the requirement itself, and the benefit which the applicant would derive in complying with it, and compliance with the requirement of pre-deposit would cause great irreparable injury to the appellant. (c) Three aspects are to be kept in mind for stay and dispensing with the requirement of pre-deposit - (i) prima facie case; (ii) balance of convenience and (iii) irreparable loss. (d) balance of convenience must be clearly in favour of making interim order and there should not be slightest indication of or likelihood of prejudice to the interests of public revenue. (e) when the Tribunal decides to grant full or partial stay, it has to impose such condition as are necessary to safeguard the interests of revenue and this is an imperative requirement. 6.1.1 The bala....
X X X X Extracts X X X X
X X X X Extracts X X X X
.... duty which the imported inputs used in the manufacture of final products exported, have suffered and Section 75(2) empowers the Central Government to make rules in this regard. Section 37(2)(xvi) read with Section 37(2A) empower the Central Government to make rules for rebate of Central Excise duty on the inputs used in manufacture of the goods exported out of India. Section 93A read with Section 94 of the Finance Act, 1994 empowers the Central Government to make rules for grant of rebate of service tax paid on taxable services used in or in relation to manufacture of goods exported out of India. The Drawback Rules, 1995, framed under Section 75(2) of Customs Act, 1962, Section 37 of Central Excise Act, 1944 and Section 93A read with Section 94 of the Finance Act, 1994 provide refund of customs duty paid on imported inputs, excise duty paid on indigenous inputs and service tax paid on input services used in the manufacture of finished goods exported, at rates called "All Industry Rate" or "Brand Rates". Rule 3 of Drawback Rules provides for fixation of "all industry rates" while Rule 7 provides for fixation of brand rate. In this case, we are concerned with "all industry rates" fi....
X X X X Extracts X X X X
X X X X Extracts X X X X
.... has been paid and not on the rest, or only a part of the duty or tax chargeable has been paid; or the duty or the tax paid has been rebated or refunded in whole or in part or given as credit, under any provision of Customs Act, 1962 and the rules made thereunder, or of the Central Excise Act, 1944 and the rules made thereunder or of the Finance Act, 1994 or the rules made thereunder, the drawback admissible on the said goods shall be reduced taking into account the lesser duty or tax paid or the rebate or refund on credit obtained." 7.2  Thus - (a) if credit of excise duties paid on inputs and/or service tax paid on input services, used in or in relation to manufacture of some finished goods exported has been availed by the manufacturer, excise portion of duty drawback under Section 75 will not be available; and (b) if certain inputs are fully exempt from customs duty or Central Excise duty, the drawback under Rule 3 will get reduced to that extent. 7.2.1 Thus if an exporter wants to claim full rate of drawback, the burden will be on him to show that the condition of 1st proviso to Rule 3 are satisfied. It is fo....
X X X X Extracts X X X X
X X X X Extracts X X X X
....e market. The Cenvat availed has therefore been 'given back' to the Government when such goods were cleared for local market. The only possibility of double benefit would arise only when the exporter is able to take the drawback of the Central Excise portion and also the rebate of terminal excise duty paid on goods at the time of their clearance to the local market. Such rebate is presently not possible in terms of No. 19/2004-C.E. (N.T.) and 20/2004-C.E. (N.T.) as the rebate is granted only if goods are exported directly from the factory/warehouse and not from the market. However, as an abundant precaution, the merchant exporters sourcing their goods from the market and claiming Central Excise portion of duty drawback may be asked to specifically declare, at the time of export, that no rebate (both input rebate and final product rebate) shall be taken against the exports made against these shipping bills." 7.2.4 The above circular of the Board, based on the preposition that the goods purchased from the market are deemed to be duty paid and hence non-Cenvat credit availed, as when Cenvat credit is used by a manufacturer for payment of duty on goods cleared for home market, ....
X X X X Extracts X X X X
X X X X Extracts X X X X
....input service tax rebate or drawback benefit and excise portion of duty drawback under Rule 3 of Drawback Rules is subject to non-availment of input/input service Cenvat credit or input/input service tax rebate. The principle that in respect of the same goods exported, input/input service Cenvat credit and excise portion of duty drawback under Rule 3 of Drawback Rules is not permissible, remains applicable irrespective of whether the manufacturer of the goods and exporter is the same person or are different persons. The Board's Circular No. 16/2009-Cus., dated 25-5-2009 results in the Government first giving Cenvat credit benefit to the manufacturer and thereby getting less duty from the manufacturer when he utilises the input/input service Cenvat credit for payment of duty on the final product and then refunding the input duty/input service tax in respect of the same goods in form of excise portion of drawback when the same are exported by a trader under drawback claim. (c) When proviso to Rule 3 of the Drawback Rules permits full drawback including excise portion subject to non-availment of input/input service Cenvat credit or non-availment of input/inp....
X X X X Extracts X X X X
X X X X Extracts X X X X
....ufacturer i.e. Annexure I declarations were filed. On verification those were found to be false. The appellant immediately after export received full drawback including excise portion on provisional basis. Therefore for failure to produce any evidence showing non-availment of input/input service Cenvat credit, the excise portion of the drawback is not permissible in law. Since export was made under drawback claim and such claim was received by the appellant during period prior to 25-5-2009 and as per the Board's instructions excise portion of drawback is not available in respect of goods exported by a Merchant exporter purchased from traders in the market, the appellant has been unjustly enriched. It has failed to establish a prima facie case in its favour making an unlawful claim. Therefore the claim was contrary to the statutory provisions of the Rule 3 of the Drawback Rules. 8.2 Enactments like Customs Act, 1962, and Customs Tariff Act, 1975, are not merely taxing statutes but are also potent instruments in the hands of the Government to safeguard interest of the economy. One of its measures is to prevent deceptive practices of undue claim of fiscal incentives. Drawback ....
X X X X Extracts X X X X
X X X X Extracts X X X X
....cks seized from them as if to permit them to continue to indulge in the very practices which were to be prevented by the seizure. We have come across cases where land reform and important welfare legislations have been stayed by courts. Incalculable harm has been done by such interim orders. All this is not to say that interim orders may never be made against public authorities. There are, of course, cases which demand that interim orders should be made in the interests of justice. Where gross violations of the law and injustices are perpetrated or are about to be perpetrated, it is the bounden duty of the Court to intervene and give appropriate interim relief. In cases where denial of interim relief may lead to public mischief, grave irreparable private injury or shake a citizen's faith in the impartiality of public administration, a Court may well be justified in granting interim relief against public authority. But since the law presumes that public authorities function properly and bona fide with due regard to the public interest, a Court must be circumspect in granting interim orders of far reaching dimensions or orders causing administrative, burdensome inconvenience or order....