Mukesh R. Shah, J.@mdashAs common question of facts and law arise in both these petitions, they are disposed of by this common judgment and order. Both these petitions have been preferred by the respective petitioners for an appropriate writ, order and/or direction to quash and set aside the impugned Common Order No. 71-72/2009, dated 12-5-2009 passed by the respondent No. 1 - revisional authority, by which the revisional authority has allowed the said revision applications filed by the respondent No. 2 - Commissioner of Customs, Kandla, by quashing and setting aside the order passed in appeal and upholding the Order-in-Original denying drawback to the respective petitioners.
2. For the sake of convenience, facts of Special Civil Application No. 8950 of 2009 in the case of Micro Forge (India) Limited are narrated:
3.1 That the petitioner is engaged in the manufacturing Flanges and machinery component at its work place situated at Rajkot-Gondal Highway, Rajkot. The petitioner is an Export Oriented Unit and therefore, it exports its product to various countries outside India. That the petitioner is also possessing Export House Status as approved by the Government of India. It is the case on behalf of the petitioner that the petitioner also maintains separate register for the input used in the manufacture of final product which is ultimately exported. That appropriate declarations in the said regard are also made in the application for removal of export product. It is the case on behalf of the petitioner that the petitioner has been submitting application in Form ARE-1 in which the petitioner declared that the petitioner is not availing Cenvat credit. According to the petitioner, clearance of export goods was against the claim of duty drawback.
3.2 That the petitioner exported goods during the period between 5-2-2003 and 28-3-2003 (for the year 2002-2003) and for the period between 4-4-2003 and 5-4-2003 (for the year 2003-2004) by 45 different Shipping Bills. That the petitioner has claimed duty drawback on the aforesaid export on the basis of All Industry Rates of duty drawback. According to the petitioner, All Industry Rates of duty drawback for the year 2002-2003 was governed by Notification No. 33/2002-Customs (N.T.), dated 29-5-2002 as amended by Notification No. 80/2/Customs (NT.), dated 10-12-2002. The relevant entry in the notification was under Heading No. 73.29. That so far as financial year 2003-2004 is concerned, relevant entry was under Heading No. 73.28. According to the petitioner, the petitioner claimed duty drawback in respect of the goods exported by the petitioner. It is also the case on behalf of the petitioner that as per the Notification, the petitioner was eligible for the benefit of duty drawback even if the goods manufactured either with the use of imported material or indigenous material.
3.3 It is the case on behalf of the petitioner that All Industry Rates of duty drawback were determined under Rule 3(2) of Customs and Central Excise Duty Drawback Rules, 1995 (hereinafter referred to as "the Duty Drawback Rules") wherein average quantity or value of each class of description of imported material of excisable material used for production is taken into account. That the average amount of customs and excise duty is also taken into account for working out the duty drawback. Therefore, according to the petitioner, the petitioner was entitled to benefit of duty drawback at All Industry Drawback Duty determined under the above Rules.
3.4 That the petitioner submitted 45 Shipping Bills in respect of exports made during the aforesaid period in the financial year 2002-2003 and 2003-2004 for claiming the benefit of duty drawback to the extent of Rs. 1,69,69,392. The respondent No. 3 - Deputy Commissioner (DBK), Kandla rejected the said claim by observing that as the petitioner has not used imported material for the manufacture of Flanges, the petitioner will not be entitled to the claim of duty drawback. The said authority also observed that as the claim of the petitioner is disproportionate vis-a-vis FOB value of the export product, the petitioner cannot claim benefit of duty drawback. The said authority also came to the conclusion that no data as regards Flanges was furnished by the Engineering Export Promotion Council (EEPC) for determining drawback duty under Rule 3(C)(2) of the Rules read with Section 75(2)(a) of the Customs Act, 1972. The said authority, therefore, came to the conclusion that the aforesaid entries i.e. 73.29 and 73.30 cannot be applied to the export of Flanges by the petitioner for claiming duty drawback in the Schedule for 2002-2003 and Entry No. 73.28 in the drawback schedule for the financial year 2003-2004.
3.5 Feeling aggrieved and dissatisfied with the Order-in-Original denying duty drawback on export of Flanges, the petitioner preferred appeal before the Commissioner of Customs (Appeals), Rajkot. It is the case on behalf of the petitioner that in the appeal the petitioner pointed out that All Industry Rates of Duty Drawback for the year 2002-2003 was covered by Notification No. 33 of 2002, dated 29-5-2002. That the said notification was amended by notification dated 10-12-2002 and in the amended notification, condition of use of imported steel in the manufacture of goods was removed. It is the case on behalf of the petitioner that in other words, by the amended notification dated 10-12-2002, the requirement to use the imported material in the final product was removed and therefore, the petitioner was not required to use imported raw material. The petitioner, therefore, submitted before the first appellate authority that exports covered by 45 shipping bills which are subject matter of the present petition were made in this period when the amended notification dated 10-12-2002 was in operation. According to the petitioner, thereafter the Board issued Notification dated 25-6-2003 which was made effective from 1-7-2003 under which Entry Nos. 73.28, 73.29, 73.30 and 73.31 stood omitted. According to the petitioner, the petitioner claimed benefit of the amended notification dated 10-12-2002 only for exports made between the period 5-2-2003 and 5-4-2003 and therefore, the petitioner was entitled to the benefit of duty drawback on the goods exported, in which the petitioner had not used imported raw material. It was also submitted by the petitioner that duty drawback rejected by the respondent No. 3 following the letter issued by the Joint Secretary cannot override the notification issued by the Government. It was also submitted that in view of the circular issued by the Central Board of Excise and Customs for claiming All Industry Duty Drawback Rates, declaration under Rule 12(1)(a)(ii) of the Customs and Central Excise Duty Drawback Rules, 1995 was not to be insisted upon. That thereafter, the Commissioner (Appeals) by order dated 15-12-2003 allowed the said appeal of the petitioner and held that the petitioner was entitled to duty drawback on the aforesaid export of Flanges.
3.6 Feeling aggrieved and dissatisfied with the order passed by the Commissioner (Appeals) allowing the said appeal and holding that the petitioner shall be entitled to duty drawback on the aforesaid exports of Flanges, respondent No. 2 - Commissioner of Customs, Kandla preferred revision application before the Central Government - revisional authority. That the revisional authority by impugned order has allowed the said revision application and has quashed and set aside the order passed by the Commissioner (Appeals) and has restored the Order-in-Original denying duty drawback on exports of Flanges by the petitioner and has held that the petitioner is not entitled to duty drawback as per All Industry Rates on export of Flanges by the petitioner for the period in question.
3.7 Feeling aggrieved and dissatisfied with the impugned common order passed by the revisional authority, the petitioners have preferred both these petitions under Article 226 of the Constitution of India.
3. Mr. Paresh Dave, learned advocate appearing on behalf of the respective petitioners in both the petitions has vehemently submitted that the revisional authority has materially erred in holding that the petitioners are not entitled to duty drawback as per All Industry Rates of drawback against Entry No. 73.29 and 73.28 for the period under consideration, respectively.
3.1 Mr. Paresh Dave, learned advocate appearing on behalf of the respective petitioners has further submitted that while deciding the revision application, the revisional authority has not properly appreciated and considered the fixation of All Industry Rates of Drawback and subsequent clarificatory Circulars issued by the Department.
3.2 Mr. Paresh Dave, learned advocate appearing on behalf of the respective petitioners has further submitted that as such all Forgings i.e. all products manufactured through forging process were covered under S.S. No. 73.29. It is submitted that the goods manufactured by the petitioners were also manufactured through Forgings as certified and confirmed by the IIT vide report dated 11-3-2003. The said goods were also covered under S.S. No. 73.29 and accordingly All Industry Rates of Drawback at Rs. 19 per kilogram was admissible to the petitioners.
3.3 Mr. Paresh Dave, learned advocate appearing on behalf of the respective petitioners has further submitted that the revisional authority has denied All Industry Rates of Drawback to the petitioners on the ground that the goods manufactured and exported by the petitioners were "Flanges", which otherwise were manufactured through forging process, but All Industry Rate against S.S. No. 73.29 was not meant for Flanges as clarified by letters dated 8-4-2003 and 5-6-2003 issued by the Joint Secretary (Drawback). It is submitted that even Flanges being Forgings were not excluded from S.S. No. 73.29 and such exclusion cannot be provided by way of a letter issued by an officer of the Drawback Department when no such exclusion was provided under the Notification prescribing All Industry Rates of Drawback.
3.4 Mr. Paresh Dave, learned advocate appearing on behalf of the respective petitioners has further submitted that as such the schedule to Drawback Notification could be amended only by another notification, but scope of the notification cannot otherwise be diluted or curtailed by way of a letter issued by an officer of the Department. In support of his above submission, he has relied upon the decisions in the case of
3.5 Mr. Paresh Dave, learned advocate appearing on behalf of the respective petitioners has further submitted that even if letters dated 8-4-2003 and 5-6-2003 issued by the Joint Secretary (Drawback) stating that All Industry Rate under Sl. No. 73.290 was not admissible to Flanges are considered as clarificatory circulars, a beneficial circular has to be applied retrospectively, while oppressive circular has to be applied prospectively. It is submitted that the above letters, therefore, cannot be applied for export made from February, 2003 to 5-4-2003. In support of his above submissions, he has relied upon the decision of the Hon''ble Supreme Court in the case of
3.6 Mr. Paresh Dave, learned advocate appearing on behalf of the respective petitioners has further submitted that All Industry Rates have no relation to the actual input consumption pattern and actual incidence suffered on inputs of a particular exporter or individual consignments exported and therefore All Industry Rate should be allowed even without any evidence of actual duties suffered on imported or indigenous inputs used. In support of his above submission, he has relied upon the Circular No. 24/2001-Cus. , dated 20-4-2001 as well as decision of the Hon''ble Supreme Court in the case of
No other submissions have been made.
Making above submissions and relying upon above decisions, it is requested to allow both these Special Civil Applications and quash and set aside the impugned orders passed by the revisional authority and restore the orders passed by the Commissioner (Appeals) by holding that the petitioners are entitled to All Industry Rates at the rate of Rs. 19 per Kg. on the aforesaid goods exported by the petitioners during the period under consideration for the relevant shipping bills.
4. Both these appeals are opposed by Ms. Amee Yajnik, learned advocate appearing on behalf of the respondent Nos. 2 and 3. It is submitted that in the facts and circumstances of the case the impugned common order passed by the revisional authority is absolutely in consonance with the respective notifications and as per the Duty Drawback Rules. It is submitted that the question is not whether the respective petitioners used imported steel as input for manufacture of the goods in question or not. It is submitted that the question is whether the goods manufactured and exported by the petitioners i.e. Flanges were covered under Heading No. 73.29 for the financial year 2002-2003 under Heading No. 73.28 for the financial year 2003-2004 or not. It is submitted that as such as per Rule 3(2) of Duty Drawback Rules, All Industry Rates were determined with respect to all the respective goods mentioned in the said notification considering the average quantity or value of each class of description of imported material of excisable material used for production and average amount of customs and excise duty. It is submitted that while determining All Industry Rates of Duty Drawback, relevant data as per Rule 3(2) of the Duty Drawback Rules were provided by Engineering Export Promotion Council (EEPC) and only thereafter, average All Industry Rate of Duty Drawback with respect to the goods were required to be determined. It is submitted that in the present case, it was found that the data provided by the Engineering Export Promotion Council (EEPC) did not contain data regarding Flanges. It is submitted that therefore, as such there was no mention of "Flanges" in S.S. No. 73.28/73.29 and therefore, it is rightly held that the petitioners are not entitled to All Industry Rate of Duty Drawback under S.S. No. 73.28/73.29 at the rate of Rs. 19 per KG on export of Flanges. It is submitted that as such it was also found that the Flanges required low grade steel as input and the value of which is very low. And therefore, as per the clarification issued by the department Entries Nos. 73.28 and 73.29 were not representative of the product "Flanges". It is submitted that therefore, when the export of Flanges was not covered under Heading S.S. Nos. 73.28 and 73.29, the petitioners are rightly denied the All Industry Duty Drawback on export of Flanges.
4.1 It is further submitted that even otherwise, the petitioners did not comply with the relevant requirement i.e. the petitioners neither filed declaration under Rule 12(1)(a)(ii) of the Customs and Central Excise Duty Drawback Rules, 1995 nor they submitted requisite legally required appendix IV and V (along with shipping bills for EDI System) and therefore, the petitioners are not entitled to duty drawback.
4.2 It is further submitted that reasoned and speaking order has been passed by the revisional authority dealing with all the contentions/submissions made by the petitioners. It is submitted that as has been found that the petitioners were not entitled to the duty drawback as per All Industry Rates under Heading S.S. Nos. 73.28/73.29, no error has been committed by the revisional authority in quashing and setting aside the order passed by the Commissioner (Appeals) and in denying All Industry Rates of Duty Drawback at the rate of Rs. 19 per Kg. on exports of goods "Flanges" by the respective petitioners.
By making above submissions, it is requested to dismiss both these Special Civil Applications.
5. Heard the learned advocates appearing on behalf of the respective parties at length.
5.1 At the outset, it is required to be noted that the petitioners are claiming All Industry Duty Drawback on export of goods - "Flanges" at the rate of Rs. 19/- per Kg. as per S.S. No. 73.29 under Chapter No. 73 of Export Notification No. 33 of 2002, during the period between 5-2-2003 and 28-3-2003 (for the year 2002-2003) and for the period between 4-4-2003 and 5-4-2003 (for the year 2003-2004) with respect to 45 different Shipping Bills. Relevant Entry No. 73.29 reads as under:-
"Draw Back Rates 2002-03.
5.2 It is the case on behalf of the petitioners that as "Flanges" is manufactured through forging process, the petitioners shall be entitled to All Industry Duty Drawback at the rate of Rs. 19 per kg. on Steel content on export of "Flanges". However, duty drawback as claimed by the petitioners has been denied on the grounds that the petitioners have failed to give appropriate declaration in respect of DBK claimed under respective Serial Numbers as required in terms of Rule 12(1)(a)(ii) of the Duty Drawback Rules, 1995 as well as on the ground that under Sr. No. 73.29, there is no reference to "Flanges". It is also the case on behalf of the respondents that when All Industry Rates of Duty Drawback, under the aforesaid notification with respect to different Sr. Nos. were fixed/determined by the Central Government, the data provided by the Forging Panel of Engineering Export Promotion Council did not contain data regarding Flanges. Therefore, it is the case on behalf of the respondents that on export of the goods "Flanges", the petitioners are not entitled to All Industry Duty Drawback under the notification and S.S. No. 73.29/73.28. Therefore, short question which is posed for consideration of this Court is whether on export of the product "Flanges", the petitioners shall be entitled to duty drawback on All Industry Drawback Rates at the rate of Rs. 19 per Kg. on Steel content as provided under S.S. No. 73.29?. While considering the aforesaid question, the relevant provisions of Customs and Central Excise Duty Drawback Rules, 1995 deserve consideration. Rule 2(a) defines "Drawback". Rule 2(a) reads as under:
"2(a). "drawback", in relation to any goods manufactured in India, and exported, means the rebate of duty chargeable on any imported materials or excisable materials used in the manufacture of such goods;"
5.3 Rule 3 provides for rates of duty drawback and as per Rule 3 subject to the provisions of the Customs Act, 1962 and the Rules made thereunder; Central Excise Act and the Rules made thereunder and Duty Drawback Rules, 1995, a drawback may be allowed on the export of goods at such amounts or at such rates, as may be determined by the Central Government. (All Industry Duty Drawback Rates determined by the Central Government). As per sub-rule (2) of Rule 3, while determining the amount of rate of drawback under the said rule, Central Government shall have regard to so many aspects as mentioned in sub-rule (2) of Rule 3. Rule 3 of the Duty Drawback Rules, reads as under:-
"3. Drawback. - (1) Subject to the provisions of-
(a) the Customs Act, 1962 (52 of 1962) and the rules made thereunder,
(b) the Central Excises and Salt Act, 1944 (1 of 1944) and the rules made thereunder, and
(c) these rules,
a drawback may be allowed on the export of goods at such amount, or at such rates, as may be determined by the Central Government:
Provided that where any goods are produced or manufactured from imported materials or excisable materials on some of which only duty chargeable thereon has been paid and not on the rest, or only a part of the duty chargeable has been paid; or the duty paid has been rebated or refunded in whole or in part or given as credit, under any of the provisions of the Customs Act, 1962 (52 of 1962), and the rules made thereunder, or of the Central Excise and Salt Act, 1944 (1 of 1944) and the rules made thereunder, the drawback admissible on the said goods shall be reduced taking into account the lesser duty paid or the rebate, refund or credit obtained:
Provided further that no drawback shall be allowed-
(i) if the said goods, except tea chests used as packing material for export of blended tea, have been taken into use after manufacture;
(ii) if the said goods are produced or manufactured, using imported materials or excisable materials in respect of which duties have not been paid; or
(iii) on jute batching oil used in the manufacture of export goods, namely, jute (including Bimlipat jute or mesta fibre), yarn, twist, twine, thread, cords and ropes;
(iv) if the said goods, being packing materials have been used in or in relation to the export of-
(1) Jute yarn (including Bimlipatam jute or mesta fibre), twist, twine, thread and ropes in which jute yarn predominates in weight;
(2) Jute Fabrics (including Bimlipatam jute or mesta fibre), in which jute predominates in weight;
(3) jute manufactures not elsewhere specified (including Bimlipatam jute or mesta fibre) in which jute predominates in weight.
(2) In determining the amount or rate of drawback under this rule, the Central Government shall have regard to,-
(a) the average quantity or value of each class or description of the materials from which a particular class of goods is ordinarily produced or manufactured in India;
(b) the average quantity or value of the imported materials or excisable materials used for production or manufacture in India of a particular class of goods;
(c) the average amount of duties paid on imported materials or excisable materials used in the manufacture 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 reused 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."
5.4 Thus, while determining the rates of duty drawback - All Industry Duty Drawback Rates, Central Government was required to consider average quantity or value of each class of description of imported material from which a particular class of goods is ordinarily produced or manufactured in India (input used); the average quantity or value of the imported materials or excisable materials used for production or manufacture in India of a particular class of goods; the average amount of duties paid on imported materials or excisable materials used in the manufacture of semis, components and intermediate products which are used in the manufacture of goods etc. It appears that while determining the All Industry Duty Drawback Rates, relevant data as mentioned in sub-rule (2) of Rule 3 was supplied by the Forging Panel of Engineering Export Promotion Council and on the basis of the relevant data supplied by the said Council with respect to each subject Sr. No. And the relevant products All Industry Duty Drawback Duty were fixed. In the present case it appears and as clarified by the Joint Secretary (Drawback) vide his communication dated 8-4-2003, the data provided by the Forging Panel of Engineering Export Promotion Council did not contain the data regarding Flanges, and therefore, as such there is no specific mention regarding "Flanges" in the S.S. No. 73.29/73.28 under which the petitioners are claiming duty drawback at the rate of Rs. 19 per Kg. on steel contents. Under the circumstances, when there is no specific mention with respect to "Flanges" in the S.S. No. 73.29, the claim of the petitioners for duty drawback at the rate of Rs. 19 per Kg. as per S.S. No. 73.29/73.28 is rightly rejected. At this stage it is required to be noted and it is not disputed by Mr. Dave, learned advocate appearing on behalf of the petitioners that Flanges require low grade steel as input and the value of which is very low. So far as the other products as mentioned in S.S. No. 73.29/73.30 are concerned, they require a high grade steel as input and consequently the value of the same would also be very high. Therefore, "Flanges" cannot be compared with other produces as mentioned in S.S. No. 73.29/73.28 as the value of the materials used for production of Flanges and the production of other goods/class of goods would be different and would vary substantially. Therefore, if the contention of the petitioners is accepted that the petitioners shall be entitled to All Industry Duty Drawback at the rate of Rs. 19 per Kg. under S.S. No. 73.29 at par with other products as mentioned in S.S. No. 73.29, in that case, as the petitioners had used low grade steel as input in the manufacture of Flanges and the value of which is very low, the petitioners shall be getting duty drawback at the higher amount i.e. Rs. 19 per Kg. which is not permissible. As stated above, as such no data was available with the Central Government with regard to Flanges as the same was not provided by the Forging Panel of Engineering Export Promotion Council regarding Flanges. Under the circumstances when no data regarding Flanges was available with the Central Government with respect to requirement as per sub-rule (2) of Rule 3, inter alia it was not possible for the Central Government to determine the amount of rate of drawback under Rule 3. Under the circumstances, on the aforesaid ground, the petitioners are rightly denied All Industry Duty Drawback as claimed by them at the rate of Rs. 19 per Kg. on steel contents.
5.5 At this stage, it is required to be noted that even with respect to the goods covered under S.S. Nos. 73.28, 73.29, 73.30 and 73.31, it was found that the said entries were being misused by unscrupulous exporters who were manipulating the description of goods to derive undue higher benefits which were not intended by the Government and therefore, the said entries were subsequently deleted from the Duty Drawback Schedule, 2003-04 w.e.f. 1-7-2003.
5.6 Now, so far as the contention on behalf of the petitioners relying upon the decision of the Hon''ble Supreme Court in the case of Inter Continental (India) (supra) that for getting duty drawback it was not required to use imported steel only while manufacturing product exported and even the input purchased from the local market can be used as input for a product exported, is concerned, in view of the aforesaid finding that the "Flanges" is not included in the S.S. No. 73.29/73.28 and therefore, as such the said question would not arise in the present petition and/or the said question is not required to be gone into in detail as, as such, the same would be academic.
5.7 Now, so far as the question on behalf of the petitioner relying upon the decision of the Hon''ble Supreme Court in the case of Suchitra Components Ltd. (supra) that even if letters dated 8-4-2003 and 5-6-2003 issued by the Joint Secretary (drawback) stating that All Industry Rates under S.S. No. 73.29 was not permissible to Flanges are considered as clarificatory Circulars, a beneficial circular has to be applied retrospectively, while oppressive circular has to be applied prospectively, is concerned, it is required to be noted that the aforesaid clarificatory Circular cannot be said to be applied retrospectively. Right from the beginning and when the Notification No. 33 was issued, as such there is no mention with respect to Flanges in the S.S. No. 73.29. As such, as the controversy had arisen whether on manufacture of export of "Flanges" duty drawback at the rate of Rs. 19 per Kg. under S.S. No. 73.29 is available or not, the aforesaid clarificatory Circulars have been issued. That does not mean that it is oppressive circular and therefore, the same is required to be applied prospectively.
5.8 It is also required to be noted that the petitioners have been denied duty drawback as claimed on the ground that the petitioners have failed to give declaration in respect of DBK Claimed under respective S.S. No as required under Rule 12(1)(a)(ii) of the Customs and Central Excise Duties Drawback Rules, 1995. However, nothing turns on that specifically, as observed hereinabove, Flanges is not included under S.S. No. 73.29 under which the petitioners have claimed All Industry Duty Drawback at the rate of Rs. 19 per Kg. on Steel content.
Under the circumstances, the revisional authority is justified in denying All Industry Drawback Duty as claimed by the petitioners under S.S. No. 73.29/73.30 on export of "Flanges". We see no error in the impugned order passed by the revisional authority.
In view of the above and for the reasons stated above, both the petitions fail and the same deserve to be dismissed and are accordingly dismissed. Rule is discharged in each of the petitions. No costs.
