TaxTMI 
TaxTMI 
2006 (8) TMI 208
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....ustoms, Excise and Service Tax Appellate Tribunal (hereinafter referred to as 'the CESTAT''), allowing the claim of duty drawback in respect of 4 shipping bills filed by M/s. L. T. Karle & Co., the first respondent herein, who admittedly imported the materials used in the manufacture of the goods, namely Ladies 100% Cotton Woven Blouse/Shirt, the Revenue has preferred this appeal on the ground that since the said goods had been manufactured in M/s. Karle International, an 100% Export Oriented Unit (in short "100% EOU"), there was a violation to the proviso to Section 2(c) of the Notification No.67/98 dated 1-9-1998, issued in exercise of the powers conferred by Rule 3 read with Rule 4 of the Customs and Central Excise Duties Drawback Rules, 1995, (hereinafter referred to as "the Rules") framed under Section 75(2) of the Customs Act (hereinafter referred to as "the Act"), raising the following substantial questions of law :- "1. Whether the findings of the Tribunal in equating the Circulars permitting Brand Rate of Drawback with the claim for All Industry Duty Drawback is correct in law. 2. Whether the Tribunal is correct in law in overlooking the facts....
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....ted under Section 75A(2) of the Customs Act, 1962 should not be demanded on the drawback amount of Rs. 21,03,083/- already sanctioned. (d) Penalty should not be imposed under Section 114(iii) of the Customs Act, 1962 for having suppressed the fact of having got the export goods manufactured in an 100% EOU and also for having violated the provisions of sub-section (2) of Section 50 of the Customs Act, 1962. 4.4.1 On receipt of the said show cause notice dated 23-8-2001, the first respondent in its reply dated 26-9-2001 and also in the personal hearing on 29-11-2001, admitted that the raw materials imported were supplied to M/s. Karle International, an 100% EOU, for manufacture of the finished goods, using the plant and machinery of the 100% EOU; and that the finished goods were exported thereafter on behalf of the first respondent viz., M/s. L. T. Karle & Co., a unit of DTA through M/s. Karle International, an 100% EOU, under four shipping bills referred to above and claimed duty drawback of Rs. 21,03,083/-, which was sanctioned by the appellant and 50% of the same was already paid to the first respondent. 4.4.2 In the reply dated 26-9-2001, the allegations that M/s. ....
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....d that clause 2 (c) of the Notification dated 1-9-1998 is applicable to the instant case and therefore due to the violation to Clause 2 (c), M/s. L. T. Karle Co. Ltd. is not entitled to claim the duty drawback. Accordingly, the Commissioner refused the duty drawback amounting to Rs. 21,03,083/- and demanded the repayment of the duty drawback already disbursed to the first respondent with interest under Section 75(A) (2) of the Customs Act. The Commissioner also imposed a penalty of Rs. 22,00,000/- on the first respondent under Section 114(iii) of the Customs Act, 1962. 4.6.1 Aggrieved by the order of the Commissioner, M/s. Karle Co. Ltd., the first respondent herein, preferred an appeal before the CESTAT. 4.6.2 The CESTAT, appreciating the contentions of the first respondent, M/s. Karle Co. Ltd., a DTA unit and also taking note of its earlier decision made in Leela Scottish Lace Ltd. v. Commissioner of Customs, Bangalore [2003(153) E.L.T.611] and Leela Scottish Lace Ltd. v. Commissioner of Customs [2003 (156) E.L.T. 548], allowed the appeal holding that the first respondent, viz., M/s. L. T. Karle & Co. Ltd., a DTA unit had made out a case on merits in its favour, as there is....
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....ch goods or class of goods is less than the value of the imported materials used in the manufacture or processing of such goods or carrying out any operation on such goods or class of goods, or is not more than such percentage of the value of the imported materials used in the manufacture or processing of such goods or carrying out any operation on such goods or class of goods as the Central Government may, by notification in the Official Gazette, specify in this behalf: Provided further that where any drawback has been allowed on any goods under this sub-section and the sale proceeds in respect of such goods are not received by or on behalf of the exporter in India within the time allowed under the Foreign Exchange Management Act, 1999 (42 of 1999), such drawback shall be deemed never to have been allowed and the Central Government may, by rules made under sub-section 92.), specify the procedure for the recovery or adjustment of the amount of such drawback; (1A) Where it appears to the Central Government that the quantity of a particular material imported into India is more than the total quantity of like material that has been used in the goods manufactured, pro....
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....export goods. 7.3 75A(1) of the Act provides for the interest on the drawback in the case where the drawback payable to the claimant under section 74 or section 75 is not paid within a period of two months from the date of filing the claim. 75A(2) of the Act contemplates where any drawback has been paid to the claimant erroneously, the claimant shall, within a period of two months from the date of demand, pay in addition to the said amount of draw back, interest at the rate fixed under Section 28AA from the date of expiry of the said two months to the date of recovery of such drawbacks. 8.1 The Central Government, in exercise of powers conferred under Section 75(2) of the Customs Act, referred to above, framed the Central Excise Duties Drawback Rules, 1995 (hereinafter referred to as 'the Rules'). 8.2 Rule 3 and Rule 4 of the Rules, which are relevant to the issue, read as follows : 3. Drawback. - (1) Subject to the provisions of, (a) the Customs Act, 1962 (52 of 1962) and the rules made thereunder, (b) the Central Excies and Salt Act, 1944 (1 of 1944) and the rules made thereunder and, (c) these rules, a drawba....
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....anufacture of semis, components and intermediate products which are used in the manufacture of goods; (d) the average amount of duties paid on materials wasted in the process of manufacture and catalytic agents: Provided that if any such waste or catalytic agent is re-used in any process of manufacture or is sold, the average amount of duties on the waste or catalytic agent re-used or sold shall also be deducted; (e) the average amount of duties paid on imported materials or excisable materials used for containing or, packing the export goods; (f) any other information which the Central Government may consider relevant or useful for the purpose. 4. Revision of rates. - The Central Government may revise amount or rates determined under rule 3. 9.1 In exercise of powers conferred under Rule 3 read with Rule 4 of the Rules, the Central Government issued Notification No.67 of 1998 dated 1-9-1998. Clause 2 of the said notification specifies the commodities/products which are not eligible for duty drawback. Clause 2(c) of the notification No.67 of 1998 dated 1-9-1998 reads as follows :- GOVERNMENT OF INDIA MINISTRY OF FINA....
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....India Ministry of Finance [Department of Revenue] Central Board of Excise & Customs, New Delhi Subject : 100% EOUs/EPZ/EHTP Units Permission to send out goods for jobwork outside the unit Regarding. ... 2. ... 3. It has now been decided that henceforth the permission to EOU/EPZ units for sub-contracting will be given by the Assistant Commissioner in-charge of the Export Oriented Unit (operating under Notification No.53/97-Cus., dated the 3rd June, 1997 as amended by Notification No.12/98-Cus., dated 27th April, 1998). Further the EOU/EPZ and EHTP units may be allowed to get a part of their production completed either from the DTA units or from other EOU/EPZ/EHTP units, provided raw-material for the manufacture of such goods, whether imported or indigenous, shall first reach and be accounted for in the statutory records of the above said units. Subsequently, these raw materials may be sent to the job worker for production of the final products. Final products manufactured from such raw materials shall be brought back from job worker's premises to the unit for accounting. The units will ensure that the wastage generated during....
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....ligible for payment of Brand Rate of Drawback against duties suffered on inputs, on submission of proof of payment of duty. Accordingly, drawback will be payable to such exporters under Rule 6(1) of the Customs and Central Excise Duties Drawback Rules, 1995, at the rate fixed on specific application. The procedure laid down under the said Drawback Rules will have to be followed for fixation of Brand rates of Drawback. Such exporters will have to apply to the Directorate of Drawback for fixation of Brand rates of exports under DEPB. However, under no circumstances, such exporters will be allowed to claim All-Industry Rate of Drawback." 9.5 As per the above circular dated 20-4-2000, the DTA units are eligible for duty drawback on the following conditions: (i) The inputs which are supplied by DTA units for processing by the EOUs should have been procured by DTA units on payment of applicable duties, provided the goods which are exported are in accordance with the Circular No. 67 of 1998 dated 14-9-98 and (ii) The said DTA units will be eligible for payment of Brand Rate of Drawback against duties suffered on inputs, on submission of proof of payment of duty. 9.....
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....by the revenue are binding primarily on basis of (language of statutory provisions buttressed by need of adjudicating officers to maintain uniformity in levy of tax/duty throughout the country and not on the basis of promissory estoppel, and that when a circular remains in operation, the revenue is bound by it and cannot be allowed to plea that it is not valid nor that it is contrary to the terms of statute. VI. Reasonings and Findings on the questions of law 11.1 In the light of the above relevant provisions and the rules of construction, we are now obliged to decide the questions of law raised in this appeal. 11.2 We have carefully read Section 75 of the Act, which deals with drawback on imported materials used in the manufacture of goods which are exported and it is obvious that Section 75 comes into operation when the imported materials are used in respect of the goods manufactured, processed or on which any operation has been carried out in India. It further contemplates that the inputs of such goods manufactured or processed in India should have suffered duty for claiming a drawback under Section 75 of the Act. In other words, no drawback could be claimed if inputs d....
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....ny manufacturer-exporter or exporter of such goods or the supporting manufacturer apply to the Commissioner in writing for determination of the amount or rate of drawback thereof stating all the relevant facts as provided under Rule 6 of the Rules. But, in the instant case, such contingency does not arise at all nor the Tribunal had dealt with the Brand Rate Drawback, because for the raw materials or inputs in question, the Central Government has specified the amount/ rate of drawback by issuing necessary notifications under Rule 3 read with Rule 4 of the Rules. Therefore, the first question does not arise for our consideration at all and it is answered accordingly. 12.2.1 The second question of law raised is whether the Tribunal is correct in law in overlooking the facts that the goods have been manufactured in 100% EOU and that the exporter has mis-declared such fact in the Shipping Bill. 12.2.2 As it is contended by the learned Central Government Standing Counsel that column 7, which prescribes for the name of the manufacturer, has not been filled up by the exporter, we took the pain of searching column 7 in the shipping bills produced before us. But, there is no such colu....
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....isk of repetition, we observe that even though clause 2 (c) of the notification dated 1-9-98 states that the rates of drawback specified in the Table shall not be applicable to export of any of the commodities/products if such commodity/product is manufactured and/or exported by a unit licensed as hundred per cent export-oriented undertaking in terms of the relevant provisions of the Import and Export Policy in force, the same stands clarified by a subsequent circular No. 31 of 2000 dated 20-4-2000 to the effect that DTA units may utilize the idle capacity of EOU/EPZ units the inputs which are supplied by DTA units for processing by EOU/EPZ units are procured by DTA units on payment of applicable duties and the DTA units shall be eligible for grant of drawback against duties suffered on their inputs which are processed by EOU/EPZ units for the manufacture of goods which are exported in accordance with the Circular No. 67 of 1998. 12.2.7 The Constitution Bench of the Apex Court in Collector of Central Excise, Vadodra v. Dhiren Chemical Industries, 2002 (139) E.L.T. 3 (S.C.) = [2002] 126 STC 122, held that if there are circulars which have been issued by the Central Board of Excis....