2016 (6) TMI 346
X X X X Extracts X X X X
X X X X Extracts X X X X
....tioner. For the purpose of the manufacturing activity, the petitioner imports various inputs and raw materials. The petitioner imported various items such as polyethylene, adhesive epoxy, etc. by paying customs duty utilising Duty Entitlement Pass Book Scrip("DEPB scrip" for short) which the petitioner had purchased from the market. While exporting the final product manufactured with the aid of such imported inputs, the petitioner desired to avail duty drawback. For such purpose, the petitioner applied for determination of brand rate of drawback in terms of Rule 6 of the Customs, Central Excise Duties and Service Tax Drawback Rules, 1995 (hereinafter referred to as "the Rules of 1995"). The Additional Commissioner of Customs rejected said application by an order dated 19.4.2013 on the ground that the duty was not paid in cash but through DEPB scrip. According to him, the imports made under DEPB scheme are exempt from payment of customs duty and that therefore, it cannot be stated that the imports had suffered customs duty. The petitioner challenged the order of competent authority before the Commissioner(Appeals), who by his order dated 11.7.2013 allowed the appeal. He refe....
X X X X Extracts X X X X
X X X X Extracts X X X X
....09 which provided that an importer shall be entitled to avail the drawback or CENVAT credit of additional duty leviable under section 3 of the Customs Tariff Act against the amount debited in the DEPB scrip. This clarification was interpreted as to limiting the benefit of drawback only on additional duty leviable under section 3 of the Customs Tariff Act and not to cover the drawback on basic customs duty when debited in the DEPB. This order the petitioner has challenged in this petition. 4. In Special Civil Application No.2753/2016, the petitioner has challenged an order dated 28.12.2015 by which the Commissioner (Appeals) dismissed the appeal of the petitioner and held that the petitioner would not be entitled to duty drawback. This issue arose in the background of the fact that the petitioner is an exporter of Acyclic Amide and avails of various schemes such as Vishesh Krishi and Gram Udyog Yojana ("VKGUY" for short), Focus Market Scheme("FMS" for short) and Focus Product Scheme ("FPS" for short) under which certain incentives have been granted by the Government of India on the exports made by the exporter. In this case also, the question relates to availability of duty ....
X X X X Extracts X X X X
X X X X Extracts X X X X
....s under DEPB scheme on import of goods being in the nature of availment of exemption of duty under the Customs Act, drawback would not be available. 7. The short question therefore, that calls for consideration is whether when an importer utilises DEPB scrip for the purpose of customs duty on inputs and raw materials, benefit of duty drawback would be available upon export of the final product? 8. Section 75 of the Customs Act pertains to drawback on imported materials used in the manufacture of goods which are exported. As per subsection(1) of section 75, where it appears to the Central Government that in respect of goods of any class or description, manufactured, processed or on which any operation has been carried out in India, a drawback should be allowed of duties of customs on any imported materials of a class or description, the Central Government may by issuing a notification in the official gazette, direct that drawback shall be allowed in respect of such goods in accordance with and subject to the rules made under subsection(2). Under subsection(2) of section 75, the Central Government is authorised to make rules for the purpose of carrying out the provisions of....
X X X X Extracts X X X X
X X X X Extracts X X X X
....ng Bimplipatam jute or mesta fibre), twist, twine, thread and ropes in which jute yarn predominates in weight; (2) jute fabrics (including Bimlipatam jute or mesta fibre), in which jute predominates in weight; (3) jute manufactures note elsewhere specified (including Bimlipatam jute or mesta fibre) in which jute predominates in weight. [(v) on any of the goods [falling within heading 0401, 0402, 0403, 0404, 0406, 1006 or 3501] of First Schedule to the Customs Tariff Act, 1975 (51 of 1975)]" 9. Rule 6 of the said Rules of 1995, pertains to cases where amount of rate of drawback has not been determined. Under subrule( 1) of Rule 6, where no amount of rate of drawback has been determined in respect of any goods, the manufacturer or exporter of such goods may apply for determination of amount or rate of drawback. 10. In exercise of powers under subsection( 2) of section 75 and other related statutes, the Government of India has issued notification no.92/2012 dated 4.10.2012 providing the rate of drawback as specified in the schedule to the said notification. Clause(8) of this notification provides that the rates of drawback specified in the schedule to the said notification....
X X X X Extracts X X X X
X X X X Extracts X X X X
....ate that an issue has been raised as to whether additional customs duty paid through debit under DEPB can be allowed as brand rate of duty drawback. 2. The matter has been examined by the Board. Hitherto, the additional customs duty paid in cash only was adjusted as CENVAT credit or duty drawback while the same paid through debit under DEPB was not allowed as duty drawback. In the Foreign Trade Policy 20042009, which came into force w.e.f. 192004, it has been provided under Paragraph 4.3.5 that 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 the rules framed by the Department of Revenue. 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. 3. Accordingly the instructions contained in Circular No.3/99Cus., dated 321999 stand modified. 12. A similar clarification came to be issued under circular no.26/2007 dated 20.7.2007 in which it was provided as under : "3. In brief, the issue involved is, whether the duty paid through debits under DEPB is to be treated as payment of duty or ....
X X X X Extracts X X X X
X X X X Extracts X X X X
....of the Customs Act, nor rule 3 of the Rules of 1995, provide any restriction on claim of drawback, if the basic duty of customs is paid through DEPB. 15. In order to appreciate the department's concern about the customs duty not being paid when the import is made under DEPB scheme, we may broadly refer to the DEPB scheme. The scheme is framed under the import-export policy and is one of the many duty exemption or remission schemes. The scheme provides that objective of DEPB is to neutralise incidence of customs duty on import component of export product which would include special additional duty in case of nonavailment of CENVAT credit. Neutralisation would be provided by way of grant of duty credit against export product which would be at a specified percentage of FOB value of export. The holder of DEPB would have an option to pay additional customs duty in cash also. DEPB is freely transferable. The Foreign Trade Policy of 20092014 contained an additional clause which hitherto was not a part of the policy and reads as under : "Applicability of Drawback. Additional customs duty/Excise Duty and Special Additional Duty paid in cash or through debit under DEPB may also be ad....
X X X X Extracts X X X X
X X X X Extracts X X X X
....edit or duty drawback, unless paid in cash. A corresponding clarification was issued. This clarification cannot be seen in reverse as to eliminate the facility of draw back when basic customs duty has been paid through DEPB scrip. 19. The case of imports under different other schemes substantially stand on the same footing. Though as is bound to be, terms of each scheme are different. In case of VKGUY, the foreign policy provides for incentive with the objective to compensate high transport costs and offset other disadvantages to promote exports of various products specified therein which include the agricultural produce, minor forest produce, Gram Udyog products, forest based products etc. In case of such exports, the incentive is made available in form of duty credit scrip at the rate of 5% of the FOB value of the exports. Likewise, in case of FMS, it is provided that same is to offset high freight cost and other externalities to select international markets to enhance India's export competitiveness in these markets. Specified product exported to specified countries qualify for such benefits. Duty credit scrip at the specified rate of the FOB value of the exports would be p....