TaxTMI 
TaxTMI 
2022 (9) TMI 176
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....essed is: whether the petitioner should be allowed 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 a....
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....ne 2013 37,20,762/- 18.02.2014 (Kept in abeyance) Yes 21.04.2014 July 2013 September 2013 71,41,078/- 21.05.2014 (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 ....
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.... duty drawback is claimed vis-à-vis the custom duty component based on AIR, no evidence is required to be furnished, vis-à-vis actual duty suffered on imported or indigenous 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. Besid....
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....5 of FTP, read with Public Notice No. 35, dated 01.03.2011, that it has not availed and will not avail cenvat credit, in respect of inputs and components used in supplies, if it is to claim duty drawback 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....
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....sion or order made by an officer subordinate to him. 22.1.(c) Section 19 confers on the Central Government, the power to make rules for carrying forward the provisions of the FTDR Act. 23. In the instant case, the FTP was brought 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 / ....
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....t Drawback. xxx xxx xxx" [Emphasis is ours.] 24.4. The aforesaid clause is required to be read with Clause 8.4. of the FTP, which establishes that the supply of goods, inter alia to an EOU, makes it amenable for being accorded the benefit of duty drawback: "Benefits to the Supplier 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) ....
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.... (ii) Second, where AIR of duty drawback is available, is the claimant obliged to seek fixation of brand rate? (iii) Third, whether the claimant is required to submit duty-paid documents for fixation of brand rate? This eventuality will come into play only if the claimant is obliged to seek fixation of brand rate to claim duty drawback. 26.1. As noted above, a perusal of para 8.5 read with paragraphs 8.1, 8.2, 8.3 and 8.4. of the FTP would show that: (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 cenv....
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....ular by the DGFT takes it beyond the role assigned to the DGFT, which is to implement the policy and interpret the provisions of the Foreign Trade Policy. Since the formulation of the policy i.e., Foreign Trade Policy or providing of procedures for imports and exports is a role assigned by the legislature to the Central Government, the DGFT cannot usurp that role and thus, add conditions in the garb of providing clarifications. 26. 4.(e) In this context, it would be relevant to advert to the relevant part of para 8.3.3 of 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 ....
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....e column "Drawback when Cenvat facility has not been availed" refer to the total drawback (customs, central excise and service tax component put together) allowable and those appearing under the column "Drawback when Cenvat facility has been availed" refer to the drawback allowable under the customs component. The difference between the two columns refers to the central excise and service tax component of drawback. 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." [Emphasis is ours.] 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....
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....nication dated 10.05.2013 shows that the claim made in the first application [immediately upon conversion of the petitioner's unit from DTU to 100% EOU], was rejected by the office of the Assistant DC by adopting the following rationale: "...We did not find any provision to consider the claim of DBK/deemed Export benefits prior to bonding of premises as EOU. The goods on which you have claimed DBK were received in the unit prior to declare[sic: declaring] it as EOU..." 29.2. The petitioner has assailed this approach adopted by the respondents of denying deemed export drawback on raw materials/inputs which remained unutilized with the then-existing DTA unit 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 DT....