TaxTMI 
TaxTMI 
2004 (3) TMI 72
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....under the DEPB scheme was to be calculated by taking into account the deemed import content of the said export product as per the Standard Input-Output Norms (SION) and determine basic custom duty and surcharge thereof payable on such deemed imports. It also provided that the value addition achieved by export of such product should be taken into account while determining the rate of duty credit under the Scheme. The DEPB Scheme clarified that the exports made thereunder shall not be entitled for drawback. It appears that the Central Board of Excise and Customs (for short, "the Board") vide its Circular No. 68/97, dated 2-12-1997 extended brand rate of drawback scheme under DEPB scheme. It was done so because the exporters made representations to the effect that wherever fibre goods exported by them were not liable to central excise duty, the exporters were unable to avail of Modvat Credit of additional customs duty (CVD) paid in cash on imported inputs, or excise duty paid on indigenous inputs, utilised in the production of export goods and that the duties suffered by them were not fully compensated to them at the time of export. Acting on these representations of the exporters, th....
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....ted 1-8-1997 and processed fabrics, which are covered by Notification No. 44/98-C.E. (N.T.), dated 10-12-1998. 3.Circular No. 68/97-Cus., dated 2-12-1997 shall stand amended as above. Other provisions of that Circular shall be applicable to the products consideration herein......" 3.It is not in dispute before us that in so far as the petitioner was concerned, it was not eligible for payment of brand rate of drawback under the Circular No. 68/1997 as it was able to avail Modvat credit. Vide Circular No. 68/97 the condition precedent for eligibility for payment of brand rate of drawback was non-availability of Modvat credit and since the petitioner was availing of Modvat credit it was not eligible for payment of brand rate of drawback. With effect from 16th December, 1998, the petitioner was unable to avail of Modvat credit in view of the notifications issued by the Ministry of Finance, Government of India. For the subject exports for the period from September, 1999 to January, 2001, it is petitioner's case that as it did not avail Modvat credit, it was eligible for payment of brand rate on drawback vide Circular No. 39/1999 and in fact for some of the shipping bills the petit....
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....ODVAT (CENVAT) has been availed for such excise duty paid. Brand rate of drawback in such cases shall3. be considered irrespective of whether the export product is dutiable/excisable or not. 4.Circular Nos. 68/97-Cus., dated 2-12-1997 and 39/99-Cus., dated 25-6-1999 shall stand corrected to the extent mentioned above in the preceding paragraphs and other conditions of the said two circulars shall continue to apply. All pending brand rate applications for5. exports made under DEPB Scheme against DEPB-cum-Drawback shipping bills may be processed/disposed of accordingly. Decisions in respect of past exports made6. against DEPB-cum-Drawback shipping bills, where brand rate of drawback has already been granted, shall be examined separately and suitable instructions shall follow. Suitable instructions/Standing Order may7. be issued for the guidance of Trade/field staff." 4.To complete the narration of facts we may notice here that the deemed Modvat Credit Scheme was introduced by Notification No. 29/1996, dated 10th September, 1996 inter alia in respect of yarn and processed fabrics. Vide this notification, the manufacturer of processed fabrics as well....
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....flected between September, 1999 and January, 2001 i.e. prior to the issuance of the Circular No. 39/2001. The learned Counsel submitted that the petitioner made firm commitments and exported the goods acting on the promise given by the Government and that the circular cannot be amended with retrospective effect so as to take away vested right conferred on the petitioner. The learned Counsel also submitted that in respect of the drawback claims which had already been completed, and drawback had been given pursuant to the earlier circular, the drawback cannot now be rejected or claimed back under the subsequent Circular No. 39/2001. The learned Counsel submitted that the subsequent Circular No. 39/2001 is not clarificatory. It is so because the circular No. 39/1999 does not state that drawback would be given only after SION did not cover the inputs. Rather circular shows that it was issued to make available brand rate of drawback, over and above the DEPB where Modvat credit was not available. According to the learned Counsel, by the Circular No. 39/2001, there is total change in the stand taken in the earlier Circular No. 39/1999 and totally new conditions have now been imposed for t....
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.... and in addition in respect of indigenously procured Central Excise duty paid inputs specified in SION, they also got brand rate of drawback. The objective of allowing brand rate of drawback as per the case of the respondents was only to provide rebate of additional customs duty if the same was paid in cash duty (CVD) and rebate on Central Excise duty paid in respect of the indigenous inputs not mentioned in SION. By issuing Circular No. 39/2001, the Customs Department dispelled that and corrected the anomaly which crept into the system through misconstruction of Circular No. 68/97 and the extent EXIM policy provisions. 7.Mr. R.V. Desai, the learned Senior Counsel appearing for the respondents, in the light of the aforesaid stand taken in the reply affidavit supported the Circular No. 39/2001 by submitting that by this circular the doubts about brand rate of drawback in respect of exporters under DEPB have been clarified and dispelled. He contended that in the light of the EXIM policy, 1997-2002, if the Circular No. 68/97 is read, the brand rate of drawback was allowed in the cases where (i) the CVD was paid in cash, and (ii) Central Excise duty in respect of non-SIO....
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....ll be adjusted as Modvat credit or Duty Drawback as per Rules framed by the Deptt. of Revenue." 10.It is true that under Paragraph 7.41 of the EXTM Policy, the exports made under the DEPB Scheme would not be entitled for drawback. However, the Board extended the brand rate drawback scheme in DEPB scheme vide its Circular No. 68/97 in view of the various representations received from trade/exporters. We may be benefited by the reproduction of the said circular to appreciate the controversy in proper perspective. Circular No. 68/97 reads thus : "Circular No. 68/97-Cus., dated 2-12-1997 (From F.No. 605/145/97-DBK) Government of India Ministry of Finance (Department of Revenue) Central Board of Excise & Customs, New Delhi Various representations have been received1. from Trade/Exporters that wherever final goods exported by them are not liable to Central Excise duty, in such cases, the exporters are unable to avail of Modvat credit of Additional Customs Duty (CVD) paid in cash on imported inputs, or excise duty paid on indigenous inputs, utilised in the production of export goods: and thus the duties suffered by them are not fully compensated to them at the time of....
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..... The principal reason for such extension as is reflected from the said circular was to compensate the exporter of the duties suffered by them who were unable to avail Modvat credit on additional excise duty (CVD) paid in cash on imported inputs or excise duty paid on indigenous inputs. Inter alia one of the conditions precedent for benefit of the said Circular No. 68/97 was non-availing of Modvat credit. After the said Circular No. 68/97 was issued, compounded levy scheme on textile fabrics by virtue of Notification Nos. 36/98 and 41/98 both dated 10th December, 1998 was introduced and thereby the deemed Modvat credit scheme came to an end with effect from 16th December, 1998. In the backdrop of introduction of compounded levy scheme on textile fabrics, again various representations were received by the Board. The Board examined the issue afresh and decided that exports made under DEPB scheme of those products which cannot avail Modvat credit of the additional duty of customs (CVD) paid in cash on imported inputs or excise duty paid on indigenous inputs will be eligible for payment of brand rate of drawback. This was applicable to export of re-rolled steel and processed fabrics. H....
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.... that the circulars issued by the Board were binding on the departmental authorities and the department cannot repudiate the circular issued by the Board on the basis that it was inconsistent with the statutory provision. Same thing is sought to be done by the department by repudiating the Circular No. 39/99 issued by the Board though in the garb that the said circular has been issued clarifying the whole position. But the fact is that the Circular No. 39/99 is sought to be repudiated by the department indirectly because it is inconsistent with the EXIM policy. 14.In H.M. Bags Manufacturer, the Apex Court held that circular issued by the Board under Section 37B of the Central Excise Act is effective from the date of the notification or publication. We have no hesitation in holding that the Circular No. 39/2001 has to be effective from the date it was issued and published. In other words, the Circular No. 39/2001 has to be held to be prospective and cannot be made applicable with retrospective effect. 15.The judgment of the Supreme Court in Aflon Engineering Corporation relied upon by Mr. Desai, the learned Senior Counsel for the respondents cannot be applied in the facts and ....