TaxTMI 
TaxTMI 
TaxTMI 
1991 (2) TMI 113
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....d the interpretation of Section 75 of the Customs Act, 1962 read with the Customs and Central Excise Duty Draw back Rules, 1971. 2.Section 75 of the Customs Act, 1962 empowers the Central Government, by notification in the official gazette, to direct in respect of goods of any class or description manufactured in India and exported to any place outside India, that drawback should be allowed of the duties of customs chargeable under the Act on any imported materials of a class or description used in the manufacture of such goods in accordance with and subject to the rules framed under sub-section (2) of the said section. Sub-section (2) which confers a rule making power enacts that such rules may among other things provide : for the payment of draw back equal to the amount of duty actually paid on the imported materials used in the manufacture of the goods or as is specified in the rules as the average amount of duty paid on the materials of that class or description used in the manufacture of export goods of that class or description either by manufacturers generally or by any particular manufacturer." There is similar provision in Section 37 of the Central Excises and Salt....
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....edule I; and any other information which the Central Government may consider relevant or useful for the purpose. Rule 4. Revision of rates : The Central Government may revise the amounts or rates determined under Rule 3. xxx xxx xxx Cases where amount or rate of drawback has not been determined : Where no amount or rate of drawback has been determined in respect of any goods any manufacturer or exporter of such goods may before exporting such goods apply in writing to the Central Government for the determination of the amount or rate of drawback there for stating all relevant facts including the proportion in which the materials or components are used in the production or manufacture of goods and the duties paid on such materials or components. On receipt of an application under Clause (a) the Central Government shall after making or causing to be made such inquiry as it deems fit determine the amount or rate of drawback in respect o....
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....wholly out of either viscose rayon fibre or acetate fibre polyster fibre, polyarnide fibre or acrylic fibre or wool, or from a combination of two and not more than two of the above-mentioned fibres, or a combination of any one of the above-mentioned fibres with either cotton or silk (but excluding yarn spun out of fibres obtained from fibre wastes, yarn waste or fabric wastes, by garnetting or by any other process : Cellulosic fibre content : Rs. 1.80 (Rupees one and paise eighty only) per kg. Polyester fibre content : Rs. 43.15 (Rupees forty three and paise fifteen only) per kg. Acrylic fibre content : Rs. 37.75 (Rupees thirty seven and paise seventy five only) per kg. Polyarnide fibre content : Rs. 16.40 (Rupees Sixteen and paise forty only per kg. Wool contents : in the worsted yarn of weaving quality made wool top Rs. 18.95 (Rupees Eighteen and paise ninety five only) per kg. in the worsted yarn of weaving quality not made from wool top. Rs. 13.55 (Rupees Thirteen and paise fifty five only) per kg. in the worsted Hosiery yarn and worsted hand knitting yarn made from wool top. Rs. 16.65 (Rupees Sixteen and paise sixty five only) per k....
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....this stage, it may be necessary to outline some  facts which may be relevant for appreciating the background in which the assessees' counsel urged strongly the equitable, if not also legal, claims of the appellant for the drawback of the Customs duty. Counsel claims that the assessees were almost the first group of enterpreneurs in India to manufacture polyester fibre yarn. They had been fortunate enough to obtain a contract from the Imperial Chemical Industries, Singapore. By a letter dated 2-4-1975 this concern agreed to supply free of cost of DMT required for the manufacture of blended yarn consisting of 67 per cent polyester and 33 per cent viscose fibre. The DMT was to be converted in polyester fibre, blended with viscose indigenously and shipped to customer of the ICI in Sri Lanka. Thereupon, on 2-6-1975, the assessees obtained customs clearance permits for import of 392 tons of DMT and also of 178 tons of viscose staple fibre. Eventually, however, the viscose staple fibre was obtained indigenously and the import permit, to this extent, was not utilised by the assessee. At the time of obtaining this permit, the assessees also obtained permission to convert the imported ....
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....sing advance licences as the one issued to our member poses certain problems because the licence stipulated manufacture under Customs Bond. You will appreciate the difficulty in manufacturing under bond when the fibre for export constitutes only a portion of the total manufacture of the factory. If DMT and glycol could be included in the Schedule to the Customs Notification GSR 183, the procedural difficulties in manufacturing under Bond will not apply. Exports of yarn made from raw materials obtained against advance licences could earn considerable foreign exchange because of the value added during processing." One of the assessees also made a similar request and, eventually, a notification was issued on 2nd August, 1976 under S. 25 of the Customs Act exempting DMT from Customs duty. The Government of India also wrote to one of the present appellants on 9-9-1976 drawing attention to the said notification and stating that with the issue of this notification, the assessees' problem would appear to have been solved. This, however, was not correct. The notification exempted future imports of DMT from Customs duty but the assessees, having imported the DMT earlier, to clear the same a....
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....ple fibre and that the final product was fully exported to Sri Lanka. The notification made under the rules framed for this purpose, however, provides only for a drawback in respect of the Excise duty involved in the manufacture of polyester staple fibre but not the Customs duty on the raw material actually imported. Shri Habbu, learned counsel, contends that this notification, in fact, is contrary to the provision contained in Rule 3 which obliges the Government in determining the amount or rate of drawback to, have regard, among other things, to the amount of duties paid on imported or excisable material used in the manufacture of the exported goods. He submits that, in so far as the rates prescribed by the Central Government do not take into account the element of import duty on DMT, the fixation is not in accordance with the rule. According to him, therefore, this case falls under Rule 6 which enables an assessee to apply to the Central Government to determine a drawback where none has been determined. The Central Government, he submits, was in error in rejecting the assessees' application as one falling under Rule 7 and therefore not maintainable both in law and equity. 8.Hav....
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....rawback available in respect of both customs and excise duties to importers-cum-manufacturers in respect of various categories of goods. In other words, the amount of drawback is not intended to be the amount of the duties that may have been paid by individual manufacturer; it is to be determined by considering the overall position prevalent in the country in respect of each of the categories of trade in the goods specified in Schedule II. We think that, if this basic principle is understood, the decision of the Government would become intelligible and rational. 9.There is no controversy that, in this case, the  goods exported fall under Item 25. Learned counsel sought to contend that the goods here fall under sub-item 2501 but this is clearly untenable. Sub-item 2501 represents a residuary category which will not be attracted to the goods here which clearly fall under sub-item 2502. The notification prescribes different amounts of drawback under this item depending on the composition of the yarn and the nature of its contents. It specifies an amount of Rs. 43.15 per Kg. as the relief by way of drawback available against the goods with which we are concerned which fall under....
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....to import a raw material which was available in the country itself. In fact, this is the aspect on which the Delhi High Court has laid considerable emphasis. Learned counsel for the appellants contends that this is factually incorrect and that this is clearly shown by the very fact that the Government of India iteself, in August, 1976, decided to grant exemption in respect of customs duty for the import of DMT. He submits that if DMT had been easily available indigenously at that time, the question of granting exemption under S. 25 would not have appealed to the Government at all. He, therefore, submits that, in fixing the rate of drawback the Central Government had proceeded on the footing that no import duty would be payable on the DMT and that it will be sufficient to grant relief in respect of Central Excise duty alone. We find that, on this aspect, the position is not so simple as submitted by the learned counsel for the appellants. We have already extracted reply of the Government of India to the assessees' representation which clearly mentions that DMT is available indigenously and that, therefore, no duty in manufacture of polyester yarn was taken into account. This is a st....
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.... that this is a case where the fixation is contrary to the terms of Rule 3 and that the assessees' application for determination of a rate in his case should be taken as an application under Rule 6. Rule 6 is also inapplicable for the reason that an application under Rule 6 should be made before the export of the manufactured goods which does not seem to be the case here. The assessees' reliance on Rule 6, therefore, fails. It is true that the fixation of rates of drawback on the average basis indicated in Rule 3 could work hardship in individual cases. Provision for this contingency is made in Rule 7. The assessees' application was rightly treated as one made under this rule and they could, if at all seek relief only if their case fell within its terms. This rule, unfortunately, does not provide for relief in every case where an individual manufacturer has to pay customs and excise duty to a larger extent than that determined for his class of goods. Relief is restricted only to cases when the margin of difference is substantial and to the extent specified in the Rule 7. The High Court has discussed this point at length and demonstrated, by giving necessary figures, how the assess....