TaxTMI 
TaxTMI 
TaxTMI 
2022 (9) TMI 176
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....d to claim duty drawback on the customs duty component based on All Industry Rates ('AIR'), without having to furnish evidence concerning actual duty suffered on imported or indigenous inputs used in the manufacture of goods. 3. Before proceeding further, it would be useful to set out the broad backdrop in which the instant writ petition has been instituted in this Court. Background: 4. The petitioner is a manufacturer and exporter of pharmaceutical products. The petitioner claims that it has been in this business for over 15 years and has resultantly gained the status of a two-star export house. The petitioner also avers, an aspect which is not disputed, that it converted its Domestic Tariff Area ('DTA') unit into a 100% Export Oriented Unit ('EOU') w.e.f. 28.09.2012. 4.1. The conversion of the DTA Unit into 100% EOU, according to the petitioner, has been physically verified and certified by the jurisdictional central excise authority. 5. After the conversion to 100% EOU unit had taken place, the petitioner claimed duty drawback qua custom duty component, on the premise that deemed export had taken place. 5.1. An application, in this behalf, was filed on 08.04.2013. Via this....
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....2014 (Kept in abeyance) Yes 25.09.2014 October 2013-June 2014 93,99,853/- N/A No 24.06.2015 July 2014- March 2015 1,00,25,567/- 19.08.2015 (Kept in abeyance) Yes 8. The record shows that the petitioner had, in fact, made a consolidated representation, about its grievance concerning the failure of respondent no.3/Development Commissioner ('DC'), to extend duty drawback for the period spanning between 01.07.2012 and 31.03.2015 via communication dated 12.10.2015. 8.1. It is the petitioner's case that this communication was forwarded to respondent no.2/Director General of Foreign Trade ('DGFT'), as well. 9. The consolidated representation did not gain any traction and was rejected by the Deputy DC vide impugned order dated 26.04.2016. 9.1. Being aggrieved, on 11.07.2016, the petitioner preferred an appeal with the DGFT. Unfortunately for the petitioner, the result was no different, which was communicated to it, via impugned order dated 17.11.2016. It is also a matter of record that Deputy DGFT, via the order dated 17.11.2016, also took the same stance as the DGFT, which was communicated to the petitioner, via communication dated 12.05.2016. 9.2. Inter alia, what was put....
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....genous goods used, in the manufacture of subject goods. 13. It was, thus, contended that the aforesaid notifications were binding on the DGFT and the DC, having regard to the provisions of Rule 3 and 4 of the Customs Excise and Duty Drawback Rules 1995 [in short, "1995 Rules"] read with paragraph 8.3.6 of the HBP. The contention was that the provisions of the aforementioned notifications would apply mutatis-mutandis to deemed exports, as well. 14. In support of the aforementioned submissions, reference was made to the judgment of the Bombay High Court in W.P. 7210/2017, dated 27.04.2018, titled Sarla Performance Fibers Ltd v. Union of India. Submissions on behalf of the respondents: 15. On the other hand, Ms Shiva Lakshmi, in opposition to the reliefs claimed by the petitioner, relied upon various provisions of the FTP, including paragraphs 1.3, 1.4, 1.5 and Chapters 6 and 8 of the said policy. In particular, our attention is drawn to paragraphs 8.1, 8.2, 8.3, 8.5 and 8.5.1. of the FTP. Besides this, reference was also made to Chapter 8 of the HBP. Insofar as provisions of the Foreign Trade (Development and Regulation) Act, 1992 [in short, "FTDR Act"] were concerned, reference ....
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.... against deemed exports. Since this is not the case as per the petitioner's own stand, it is not entitled to duty drawback on deemed exports. 17. Thus, in a nutshell, where cenvat credit is taken, in that case as well, basic customs duty can be claimed, albeit, based on the brand rate of duty drawback, which is founded on the evidence concerning payment of actual duty. 17.1. This option, under Column B of the AIR Duty Drawback Schedule issued by DOR, can be availed only for physical exports. For this purpose, reference was made to paragraph 8.5 of the FTP. Analysis and Reasons: 18. Before we get into the nitty-gritty of the arguments advanced by the learned counsel for the parties, it may be relevant to note certain provisions of the FTDR Act, on which reliance is placed, in particular, by Ms Lakshmi. 19. First and foremost, it needs to be borne in mind, that it is Section 3 of the FTDR Act, which empowers the Central Government to make provisions for the development and regulation of foreign trade, by facilitating imports and increasing exports. The Central Government, in this behalf, is vested with the power to publish an order in the official gazette. 20. Section 5 of the v....
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....ht into force on 27.08.2009 and remained valid till 31.03.2014. Therefore, the policy ring-fence (in a figure of speech) which is drawn for issuance of notifications, inter alia, is the FTP formulated by the Central Government, with the advice of the DGFT. 23.1. Therefore, what one needs to examine is the provisions of the FTP, insofar as they concern deemed exports. 23.2. Chapter 6 of the FTP, inter alia, deals with EOUs. Insofar as supplies from DTAs to EOUs are concerned, they are treated as deemed exports. This is evident on a bare perusal of paragraph 6.11(a) of the FTP. The same is extracted below: "Entitlement for supplies from the DTA 6.11 (a) Supplies from DTA to EOU / EHTP / STP / BTP units will be regarded as "deemed exports" and DTA supplier shall be eligible for relevant entitlements under chapter 8 of FTP, besides discharge of export obligation, if any, on the supplier. Notwithstanding the above, EOU / EHTP / STP / BTP units shall, on production of a suitable disclaimer from DTA supplier, be eligible for obtaining entitlements specified in chapter 8 of FTP. For claiming deemed export duty drawback, they shall get brand rates fixed by DC wherever All Industry Rat....
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....lier 8.4. Following table shows the benefits available to different categories of supplies as mentioned in Para 8.2 above. In respect of such supplies supplier shall be entitled to the benefits listed in paragraphs 8.3(a), (b) & (c) of the Policy, whichever is applicable. Relevant sub-para of 8.2 Benefit available as given in Para 8.3, whichever is applicable (a) (b) (c) xxx xxx xxx xxx (b) Yes Yes Exemption xxx xxx xxx xxx [Emphasis is ours.] 24.5. This brings us to the provision, that has been vigorously debated by both sides i.e., paragraph 8.5 of the FTP. The same is extracted below: "Eligibility for refund of terminal excise duty/drawback 8.5 Supply of goods will be eligible for refund of terminal excise duty in terms of para 8.3(c) of FTP, provided recipient of goods does not avail CENVAT credit/rebate on such goods. A declaration to this effect, in Annexure II of ANF 8, from recipient of goods, shall be submitted by applicant. Similarly, supplies will be eligible for deemed export drawback in terms of para 8.3(b) of FTP on Central Excise paid on inputs/components, provided CENVAT credit/ rebate has not been availed of such duty paid by supplier of go....
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....: (i) Deemed exports referred to those transactions in which goods supplied do not leave the country and the payment for such supplies is received, either in Indian rupees or in free foreign exchange. (ii) Inter alia, supplies made to EOUs are regarded as deemed exports under the FTP, provided the goods are manufactured in India. (iii) Amongst other benefits, deemed exports are eligible for duty drawback. (iv) Insofar as duty drawback is concerned, it comprises central excise duty, service tax and customs duties component. In cases where the cenvat credit facility/rebate has not been availed, duty drawback is available against all three components. However, on the other hand, where cenvat credit has been availed (as in this case), the supplies made are eligible for deemed export drawback on custom duty paid on inputs/components. This aspect emerges on a perusal of the following parts of paragraph 8.5 of the FTP: "... Similarly, supplies will be eligible for deemed export drawback in terms of para 8.3(b) of FTP on Central Excise paid on inputs/ components provided CENVAT credit facility/rebate has not been availed of such duty paid by supplier of goods..." [Emphasis is ou....
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....f the HBP. "Where All Industry Rate of Drawback is not available or same is less than 4/5th of duties actually paid on materials or components used in production or manufacture of the said goods, an application in ANF 8 along with prescribed documents may be made to RA or DC, for fixation of brand rate... " [Emphasis is ours.] 27. It is apparent that the AIR duty drawback schedule published by the DOR is, inter alia, available concerning the goods in issue i.e., Sulphamethoxazole. The relevant part of the schedule which was produced before us, qua which no dispute was raised, reads as follows: SCHEDULE A B Tariff Item Description of goods Unit Drawback when Cenvat facility has not been availed Drawback when Cenvat facility has been availed Drawback Rate Drawback cap per unit in Rs. (') Drawback Rate Drawback cap per unit in Rs. (') 1 2 3 4 5 6 7 xxx xxx xxx CHAPTER-29 ORGANIC CHEMICALS xxx &n....
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.... 28.1. A perusal of condition no.6 would show that "...if the rate indicated is the same in both the columns, it shall mean that the same pertains to only customs component and is available irrespective of whether the exporter has availed of cenvat or not." 28.2. It must be stated here that the aforementioned notifications i.e., notifications dated 04.10.2012 and 14.09.2013 have been, inter alia, issued by the Government of India in the exercise of powers under Section 75(2) of the Customs Act, 1962 and Rules 3 and 4 of the 1995 Rules and hence, in terms of para 8.3.6 of the HBP, they would have to be made applicable mutatis-mutandis to deemed exports. Rule 8.3.6. reads as follows: "8.3.6. Subject to procedure laid down in HBP, Customs and Central Excise Duty Drawback Rules, 1995 shall apply mutatis mutandis to deemed exports." 28.3. Therefore, it is quite evident, since AIR for duty drawback in respect of the goods in issue is available and the rate stipulated in columns A and B of the schedule is the same, the condition stipulated in the 2013 Circular, that duty drawback on customs duty would be available only upon fixation of brand rate, which, in turn, is based on actual du....
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....t at the time of its conversion into a 100% EOU, by contending that if this approach was in order, then a specific provision, in that behalf, would have been made in the FTP and/or HBP. 29.2.(a) The petitioner seeks to buttress this plea, by relying on paragraph 6.36.1 of the HBP. The petitioner contends that a perusal of the said paragraph of HBP would disclose that the Government of India chose to deny benefits, only in respect of plant, machinery and equipment that had already been installed in the existing DTA, qua which, no claim had been lodged. 29.3. Furthermore, the petitioner seeks to contend that the clue, as to whether or not the claim for drawback made under the first application concerning unutilized goods which were available at the time of conversion of its DTA unit into a 100% EOU unit, is found in para 6.36.1 of the HBP. In this regard, our attention has been drawn to that part of the said para, which reads as follows: "...In case there is an outstanding export commitment under EPCG scheme/Advance Authorization Scheme, it will follow the procedure laid down in Appendix 14-I-O HBP v1." 29.4. In the context of the aforesaid, it was submitted that the outstanding....