Case Law Details
GTN Textiles Limited Vs Secretary to Government (Madras High Court)
Conclusion: Claim of drawback of excise and customs duties paid on the raw materials used in manufacturing could not be denied merely because some processes in the chain of manufacturing had been conducted in the premise of EOU/unit of EPZ, if the assessee was otherwise entitled to the benefit. Export, after completion of job work, was to take place only from the EOU/EPZ, this could be given effect to only in a situation where the entire process of manufacture/finishing was occasioned in such EOU/EPZ. Where parts of the process were carried out in different locations, one could hardly conclude that this operational difference would result in denial of the benefit to the exporter. Thus, the issue was remanded back to Authority to verify specifically whether duty had been remitted on the raw materials utilised in job work.
Held: Assessee had manufactured and exported ready made garments and claimed drawback of excise and customs duties paid on the raw materials used in such manufacture. The claims had been made under All Industry Rate (AIR). Some of the processes engaged in the manufacture, such as ‘silicon washing’ and ‘mercerising’ were sub-contracted by assessee to an 100% Export Oriented Unit. EOU, after completion of the processes returned the goods for further finishing to assessee, who carried out the final processing and thereafter, exported the same. Initially assessee’s claim for drawback was allowed. Thereafter and invoking Notification No.31 of 1999 dated 20.05.1999, show cause notice was issued to assessee seeking to reverse the drawback granted and recover the same. Order-in-original was passed confirming the demand along with interest and penalty. It was held that a harmonious and purposive construction of the Rule as well as Notifications, revealed that it could not have been the intention of Legislature or the authorities concerned, to deny drawback claim merely because some processes in the chain of manufacturing had been conducted in the premise of EOU/unit of EPZ, if the assessee was otherwise entitled to the benefit. Though the Notifications do specifically require that the export, after completion of job work, was to take place only from the EOU/EPZ, this could be given effect to only in a situation where the entire process of manufacture/finishing was occasioned in such EOU/EPZ. Where parts of the process were carried out in different locations, one could hardly conclude that this operational difference would result in denial of the benefit to the exporter. The original stipulation that no drawback was available for export was imposed to ensure that no double benefit was obtained. Subsequently, when an EOU was permitted to engage in job work, the original condition stood modified to the effect that a manufacturer/exporter would also be entitled to drawback, provided the finished commodity was exported from EOU/EPZ itself. A situation such as the present where the goods revert back to assessee for further processing had not been envisaged and was thus not covered, though it was, also entitled to such benefit. Such a situation was clearly not intended to be kept out of the beneficial sweep of Notification 31 of 2000. Thus, the issue was remanded back to Authority to verify specifically whether duty had been remitted on the raw materials utilised in job work. If the result of the enquiry was positive, assessee was entitled to the drawback of the duty paid in accordance with law.
FULL TEXT OF THE HIGH COURT ORDER / JUDGEMENT
Heard Mr.G.Natarajan, learned counsel for the petitioner and Mrs. Hema Muralikrishnan, learned Senior Standing Counsel for the respondents.
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