TaxTMI 
TaxTMI 
2012 (8) TMI 898
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....ated 8-2-2006 483/08 dated 5-12-2008 2. M/s. Tata International Ltd., Industrial Estate, A.B. Road, Dewas (M.P.) are engaged in the manufacture of export of finished leather shoes, shoe uppers namely boot uppers, half boot uppers and shoe uppers for ladies, gents and children and also leather articles, ladies garments etc. The respondent is availing the benefit of Drawback or DEPB on the exports made through ICD, Pithampur, in respect of such exports. 2.1 The respondent first manufactures finished leather in their unit at Dewas from wet blue leather and chemicals. These raw materials (wet blue leather and chemicals) are being procured indigenously as well as imported by them. Further, as per the customer's requirement they manufacture shoe uppers, full shoes, leather garments from the said finished leather in their factory and are being exported under claim for Drawback as Cenvat credit facility has not been availed by them. Imported raw leather i.e. wet chrome is fully and unconditionally exempted from payment of Customs duties in terms of Notification No. 21/2002-Cus. as amended. The chemicals viz., tanning agent, Synthetic fat liquors, binders, dyes and pigment use....
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....ore this authority. 3. Being aggrieved with the impugned Orders-in-Appeal dated 29-12-2005 & 21-3-2006 applicant Commissioner filed revision applications as mentioned above on following grounds : 3.1 In the Drawback Schedule in Chapter 42 and 64 for Articles of Leather and Footwear in all the Serial/Sub-Serial Nos. i.e. for all the Articles of Leather and Leather footwear items, the drawback rate is notified with the condition that "excluding those manufactured from duty free finished leather imported under Notification No. 21/2002-Cus., dated the 1st March 2002, whether Cenvat facility has been availed or not. In the instant case, all the articles of Leather namely Ladies Leather, Hand Bags and Footwear items namely, leather shoes, shoe uppers, leather sandals/boots and sandal/boot uppers for all categories (ladies/gents/children) exported by the respondents are manufactured from the raw leather which is imported duty free under the Notification No. 21/2002-Cus. and is covered under the Chapters 42 and 64 of the drawback schedule which is excluded from the drawback schedule. It is also confirmed that the respondent have not kept any separate record of end use from whic....
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....icability of Drawback. In the instant case, the exported goods are manufactured by availing DEPB facility on inputs and hence, all industry rate is not applicable to the respondents. 3.3 Para 4.3.5 of Foreign Trade Policy 2004-2009 provides that normally, the exports made under the DEPB shall not be entitled for Drawback. However, the Additional Customs Duty/Excise duty paid in cash or through debit under DEPB shall be adjusted as Cenvat credit or Duty Drawback as per rules framed by the Department of Revenue. 3.4 Circular No. 41/2005-Cus., dated 28-10-2005 issued by the Dy. Secretary (DBK), New Delhi specifically provides that the Additional Customs Duty paid through debit under DEPB shall also be allowed as Brand Rate of Duty Drawback and no clarification has been given in respect of All India Industry Rate. Since, M/s. Tata International Ltd. are claiming the Drawback at All India Industry Rate, this Circular is not applicable to the present case and Circular No. 57/2004-Cus., dated 21-10-2004 relates to DEPB and not applicable for Drawback and Drawback Rules are independent of DEPB. Hence, this circular is not applicable In the instant case. Further, Circular No. 19....
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....pondents are liable to be rejected. Further, Para (ii) of Second Proviso to Rule 3 of Drawback Rules, 1995 provided that no Drawback shall be allowed if the said goods are produced or manufactured using imported materials or excisable materials in respect of which duties have not been paid. Circular No. 3/99-Cus., dated 3-2-1999 clarified that Brand Rate of Drawback is admissible only against cash payment of duties as laid down under proviso (ii) of Rule 3 of the Customs & Central Excise Duties Drawback Rules, 1995 and debit of duties payable under DEPB Scheme/Passbook Scheme on import of goods is in effect is availment of exemption Notification, therefore, no drawback is admissible against debit of duties made in a DEPB Book. 3.6 The applicant has also relied upon order of Hon'ble Apex Court in ITC Ltd. v. CCE, New Delhi reported in 2004 (171) E.L.T. 433 (S.C.) the case in their favour. 4. A show cause notice under Section 129DD of the Customs Act, 1962 was issued to the respondent M/s. Tata International. In response to the show cause notice, the Respondents filed cross-objections vide their letter dated 22-7-2006, wherein, they made following main submissions that :-....
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.... inputs and not for exports which are being done availing All Industry Rate Drawback and not DEPB. The Department has not correctly interpreted the above notification and Board's Circular No. 57/2004, dated 21-10-2004 and hence, they are eligible for All Industry Rate of Drawback in their case. (xi) Notification No. 37/95, dated 26-5-1995 is not applicable and relevant for All Industry Rate of Drawback and utilization of DEPB scrip in their case will not effect in their case because they are exporting under All Industry Rate Drawback claim shipping bills and not under DEPB-cum-Drawback Shipping bills. 5. After considering submissions of both the parties, this authority decided the Revision Application Nos. 380/09/DBK/06 & 380/30/DBK/06 vide Order Nos. 484/08 and 483/08, both dated 5-12-2008 respectively in favour of department. 5.1 Being aggrieved by said orders the respondent filed Writ Petition No. 689/2009 before Hon'ble Madhya Pradesh High Court at Indore Bench. Hon'ble High Court vide order dated 22-11-2011 directed as under :- 5.2 "The Commissioner (Appeals) while allowing the claim of the petitioner in respect of eligibility for all industry ra....
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....cords of the case, submissions made by both the parties, impugned orders, and order passed by Hon'ble High Court. 7. Government observes that the respondent exported various leather goods under drawback scheme. The raw materials used in manufacturing of export goods were procured indigenously as well as imported under various Schemes. In this case, the imported raw leather was fully exempted from duty vide Notification No. 21/2002-Cus., dated 1-3-2002 and the required chemicals have been imported by availing DEPB Scheme in terms of exemption Notifications Nos. 45/2002-Cus., dated 22-4-2002 and 96/2004-Cus., dated 17-9-2004. It was further observed that actually no duty has been suffered on these inputs and for some input viz. chemicals, as they have utilized DEPB Scheme for payment of duty, such debit of DEPB scrip cannot be treated as duty. According original authority rejected drawback claims of the respondent. While rejecting the drawback claims, the original authority had held that in terms of Notification No. 26/2003-Cus. (N.T.), dated 1-3-2003, Notification No. 8/2005-Cus. (N.T.), dated 18-1-2005 and Notification No. 36/2005-Cus. (N.T.), dated 2-5-2005, the rates of dra....
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....2005-Cus. (N.T.), dated 2-5-2005, wherein it has been envisaged that the rates of drawback shall not be applicable to export of a commodity or product if such commodity or product is manufactured by availing of facility under DEPB Scheme as contained in para 4.3 and para 4.3.5 of Exim Policy 2002-07 and para 4.3 and para 4.3.5 of Exim Policy 2004-09. In this regard Commissioner (Appeals) has observed that the provisions as relied upon by the department cannot be interpreted to mean that no drawback as per the notifications can be allowed on exports when the material required for processing/manufacturing of export products have been imported under DEPB Scheme on payment of duty by way of debit in DEPB Passbook. 8.1 Government notes that the relevant provisions i.e. Para 7(g) of Notification No. 36/2005-Cus. reads as follows : "7. The rates of drawback specified in the said Schedule shall not be applicable to export of a commodity or product if such commodity or product is - (a) ------------------------------------------------------------------------------------ (b) ------------------------------------------------------------------------------------ &nb....
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....ment or addition of words. Under such circumstances, the Government is of opinion that the said statutory provisions have put a prohibition on allowing drawback benefit on such export goods which are manufactured by availing facility of DEPB Scheme. As such the drawback claim at AIR rates is not admissible in this case. Government is therefore in agreement with the findings of original authority on this specific issue. 9. The Commissioner (Appeals) has relied upon Circular No. 24/2001-Cus., dated 20th April, 2001 and Circular No. 19/2005-Cus., dated 21-3-2005. The department has argued that these circulars are not relevant to this case as Circular No. 24/2001, dated 20-4-2001 clarified that no evidence of actual duties suffered on imported or indigenous nature of inputs used, even if the Industry Rate has Customs portion, should be insisted upon and in the Circular dated 21-3-2005 further the clarification given in Circular dated 20-4-2001 was reiterated. The relevant provisions of said circulars read as follows :- 9.1 "Circular No. 24/2001-Cus., dated 20th April, 2001. --------- ---------- ---------- ---------- ---------- ---------- -----....
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....tion of exporters and the average incidence of duties suffered on such inputs. These rates have no relation to the actual input consumption pattern or the actual duty incidence suffered on inputs of a particular exporter or individual consignments exported by any exporter under drawback claim. It was categorically stated in the said Circular that the first proviso to rule 3 of Drawback Rules, 1995 is meant for the Ministry and that it essentially provides a guideline as to how the duty drawback rates are to be determined in certain situations and is not intended for the field formations to use this rule for arbitrarily altering AH Industry Rates of duty drawback in the case of individual exporters for individual consignments. 3. From the above it may be noted that the concept of All Industry Rate of duty drawback is that the rates are determined taking into account the average duties paid on the inputs and in determining the rates, the average (weighted average) consumption of imported/indigenous inputs of a representative cross-section of exporters is taken into account. In view of this, it is not open to the field officers to question as to how the rate has been determined ....
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.... on such exports even though the inputs used in the manufacture of export products were cleared through DEPB route. In the present case, the applicant had admittedly procured the raw materials by using DEPB Pass Book and are, therefore, entitled to claim benefit of DEPB for their exports. Instead of that, they chose not to claim the drawback as per the All Industry Rate which is an alternate export incentive scheme and hence based on the ratio of this circular, their claim for drawback under the All Industry Rate should have been allowed. I also find that the Tribunal's decision cited by them in the case of Polyspin Ltd. v. CCE - 2005 (184) E.L.T. 384 (T) is very much relevant to the issue involved in this case even though in that order the Tribunal has only stayed the recovery of the alleged wrong payment of Drawback." For the sake of proper understanding the provision of said Circular No. 57/2004-Cus., dated 21st October, 2004, its relevant paras are extracted as under :- 10.1 "Circular No. 57/2004-Cus., dated 21st October, 2004 3. The matter has been examined by the Ministry. It is noted that the DEPB Scheme is a post export duty remission scheme, which allows neutr....
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....ed in concluding that drawback can be allowed as per said circular. He has ignored the conditions of relevant notifications notifying drawback schedules as discussed in para 8 above. Hon'ble Supreme Court has categorically held in the case M/s. Trutuff Safty Glass Industries - 2007 (215) E.L.T. 14 (S.C.) that : "23. The golden rule for construing wills, statutes, and, in fact, all written instruments has been thus stated: 'The grammatical and ordinary sense of the words is to be adhered to unless that would lead to some absurdity or some repugnance or inconsistency with the rest of the instrument, in which case the grammatical and ordinary sense of the words may be modified, so as to avoid that absurdity and inconsistency, but no further (See Grey v. Pearson - 6 H.L Cas. 61). The latter part of this "golden rule" must, however, be applied with much caution. "If," remarked Jervis, C.J., "the precise words used are plain and unambiguous in our judgment, we are bound to construe them in their ordinary sense, even though it lead, in our view of the case, to an absurdity or manliest injustice. Words may be modified or varied where their import is doubtful or obscure. But we assume....
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.... modified. ------- --------------- --------------- --------------- --------------- --------------- --------------- --------------- --------------- --------------- --------------- ---------------" 11.2 Further, relevant provisions of Exim Policies read as follows :- "Para 4.3 of Exim Policy 2004-09 :- 4.3 Objective of DEPB is to neutralise incidence of customs duty on import content of export product. Component of Special Additional (DEPB) Duty and customs duty on fuel shall also be allowed under DEPB (as brand rate) factored in DEPB rate in case of non-availment of CENVAT credit. Neutralisation shall be provided by way of grant of duty credit against export product. Credit shall be available against such export products and at such rates as may be specified by DGFT by way of public notice. Credit may be utilized for payment of Customs Duty on freely importable items. DEPB Scrips cam also be utilized for payment of duty against imports under EPCG Scheme w.e.f. 1-1-2009. 11.3 Para 4.3.5 of Exim Policy 2004-09 :- Additional customs duty/Excise Duty and Special Additional Duty paid in cash or through debit und....
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....-Customs, dated 3-2-1999 is very categorical in its terms that no drawback is admissible against the debit of dues made in DEPB or in the passbook issued under the earlier passbook scheme. However, by means of the subsequent Circular No. 41 of 2005, dated 28-10-2005 after examining the fact that hitherto the additional Customs duty paid in cash only was adjusted as duty drawback while the same paid through debit under DEPB was not allowed as duty drawback and taking note of the Foreign Trade Policy 2004-2009, which came into force w.e.f. 1-9-2004, which provided that additional Customs duty and excise duty paid in cash or through debit under DEPB shall be adjusted as Cenvat credit or duty drawback as per the rules framed by the Department of Revenue and taking note of this change, it has been decided that the additional Customs duty paid through debit under DEPB shall also be allowed as brand rate of duty drawback. Accordingly, the instructions contained in Circular No. 3 of 1999, dated 3-2-1999 stood modified. From that it is clear that the modification takes effect only after the date of Circular No. 41 of 2005, dated 28-10-2005 and not from the date on which the earlier circular....