Case Law Details
In re Blue Star climatech Limited (CAAR Mumbai)
In the recent case of In re Blue Star Climatech Limited, the Customs Authority for Advance Rulings (CAAR) in Mumbai addressed several crucial questions regarding import conditions, EPCG (Export Promotion Capital Goods) license usage, and export classifications. The ruling provides clarity on intricate matters impacting the operations of Blue Star Climatech Limited.
CAAR refrain ‘from passing a ruling on the five (05) questions i.e. from (i) to (v) (reproduced supra) asked in the subject application, which are related to duty drawback, inasmuch as, there no such jurisdiction vested in this authority as per the mandate of Chapter VB of the Customs Act, 1962.
Question (vi): Whether the Applicant can import the goods in bonded premise without payment of customs duty under Advance Authorization in accordance with Notification No. 21/2023, Customs dated April 2023 and use such goods in manufacture of exported product?
Answer: Yes, Subject to the fulfilment of the conditions stipulated in the Notification No. 21/2023- Customs dated 1st April 2023 and current Foreign Trade Policy, the Applicant can import the goods into the MOOWR unit, upon filing a bill of entry for home consumption and clearance, at the customs station of import. Such goods shall not be considered as warehoused goods in terms of section 60 of the Act.
Question (vii): Whether the Applicant can .apply for EPCG license and then de-bond the capital goods imported under the MOOWR license by utilising EPCG license for payment of customs duty payable on debonding as per Notification No. 26/2023 Customs Dated April 2023?
Answer: No, the capital goods, on which the benefits of deferral of Customs duty have already been availed/claimed under the MOOWR scheme, cannot be further de-bonded by using/utilising EPCI I license.
Question (viii): whether supply of manufactured goods by the Applicant to third party customer would be considered as a DTA Sales or Exports in case the third-party customer exports such goods as it is outside India?
Answer: Yes, Supply of manufactured goods by the Applicant to third party customer can be considered as Exports in case the third-party customer exports such goods as it is outside India and in case the goods are directly delivered to the port of Export.
The rulings by CAAR Mumbai in the case of In re Blue Star Climatech Limited provide essential clarity on import conditions, EPCG license usage, and export classifications. These decisions offer actionable insights for Blue Star Climatech Limited to navigate complex regulatory landscapes and optimize its operational strategies effectively.
FULL TEXT OF THE ORDER OF CUSTOMS AUTHORITY OF ADVANCE RULING, MUMBAI
M/s. Blue Star Climatech Limited (having IEC No. AMJCB8570E) and hereinafter referred to as ‘the applicant’ or BSCL, in short) filed an application (CAAR-1) for advance ruling before the Customs Authority for Advance Rulings, Mumbai (CAAR in short). The said application was received in the secretariat of the CAAR, Mumbai on 02.08.2023 along with its enclosures in terms of Section 2811 (I) of the Customs Act, 1962 (hereinafter referred to as the ‘Act’ also). The applicant is seeking advance ruling on the following (08) questions:
i) Whether BSCL, can claim duty drawback under Rule 6 / Rule 7 of the Customs and Central Excise Duties Drawback Rules, 2017 (notified vide Notification No.88/2017 dated 21st September 2017) for goods manufactured in the MOOWR premises (Manufacturing and Other Operations in Warehouse Regulations, 2019) and exported therefrom?
ii) If yes, whether there is a requirement that there should be import of duty paid raw materials consumed for manufacture of exported goods. Whether duty drawback would be available on goods exported by BSCL if the corresponding raw materials are procured without payment of customs duty and also for domestic procurement on payment of GST?
iii) Whether BSC, (as merchant exporter) can claim Duty Drawback under Rule 6/ Rule 7 of the Customs and Central Excise Duties Drawback Rules 2017 on export of goods manufactured by BSCL. (a MOOWR unit)?
iv) If yes, whether there is a requirement that there should be import of duty paid raw materials consumed for manufacture of exported goods. Whether Duty Drawback under Rule 6/ Rule 7, as above, would be available on goods exported by BSCL, if the corresponding raw materials are procured without payment of customs duty and also for domestic procurement on payment of GST?
v) If the answer to question (iv) is yes, whether the duty drawback would be limited for exports done after the filing of advance ruling application?
vi) Whether the Applicant can import the goods in bonded premise without payment of customs duty under Advance Authorization in accordance with Notification No. 21/2023-Customs dated 1st April 2023 and use such goods in manufacture of exported product?
vii) Whether the Applicant can apply for EPCG license and then debond the capital goods imported under the MOOWR license by utilising EPCG license for payment of customs duty payable on debonding as per Notification No. 26/2023 Customs Dated 1st April 2023?
viii) Whether supply of manufactured goods by the Applicant to third party customer would be considered as a DTA Sales or Exports in case the third-party customer exports such goods as it is outside India?
2. Applicant has stated that Blue Star Climatech Limited (BSCL, or Applicant) is a wholly owned subsidiary of Blue Star Limited (BSL); BSCI, is licensed under Section 65 of the Customs Act, 1962 [Manufacturing and Other Operations in Warehouse Regulations, 2019 (MOOWR) at Sricity, in the State of Andhra Pradesh; BSCL is availing the benefit of deferral of customs duty for import of capital goods in the said MOOWR licensed premises, however, BSCL imports raw material into the said MOOWR premises on payment of applicable customs duty without availing the deferral benefit. The applicant submitted that BSCL proposes to manufacture certain products which would be exported out of India. The goods could be exported directly by the Applicant or by its group entities. The said manufacturing activity would be carried out at the above referred MOOWR licensed premise. The raw materials required for manufacturing of’ finished goods, at the above said MOOWR premises, would be procured by BSCI.„ either locally or the same would be imported on payment of applicable duties (GST and/ or Customs duty, as applicable). The list of raw materials proposed to be imported by the Applicant and the finished products sought to be manufactured are submitted by the applicant. The Applicant submitted that it believes that it is eligible to claim drawback on the export of goods which have been manufactured in the MOOWR unit using duty paid inputs/ raw materials either imported or procured locally. The Applicant is also contemplating import of raw materials under advance authorization. The Applicant believes that it is eligible to use Advance Authorization scheme for import of raw materials into the MOOWR unit which would be used for manufacture of finished goods and thereafter exported by BSCL or BSL to fulfil the export obligation. The Applicant is also contemplating to debond certain capital goods on which the benefit of deferral of customs duty for import of capital goods has been claimed under the MOOWR scheme. The Applicant believes that it can debond the capital goods warehoused into the MOOWR unit by using EPCG authorization.
3. Statement of the applicant containing its interpretation of law and /or facts, as the case may be, in respect of the questions on which advance ruling is required is submitted by the applicant as follows:
3.1 The applicant proposes to have a new model of export of goods from the MOOWR premises and would like to confirm the eligibility of duty drawback for goods manufactured and exported from the said premises. The rates of drawback at present have been notified under Notification No. 7 of 2020 dated 28.01.2020 read with Customs and Central Excise Duties Drawback Rules, 2017 notified vide Notification No. 88 of 2017 dated 21.09.2017. Since the eligibility to claim drawback on export goods is directly related to the duty discharged on the inputs used for its manufacture, the same would fall under the category of Section 2811(2)(d) i.e. “applicability of notifications issued in respect o f tax or duties under this Act or the Customs Tariff Act, 1975 (51 of 1975)”. The applicant also desires clarity on the eligibility to avail benefits of Advance Authorization/ EPCG scheme under the Foreign Trade Policy. Since Notifications prescribing conditions to avail duty exemption benefit under Advance Authorization and F,PCG schemes are issued under section 25(1) of the Customs Act, the Applicant believes that its case is fit to be considered for Advance Ruling under Section 281–1(2)(b) i.e. applicability of a notification issued under sub-section (1) of section 25, having a bearing on the rate of duty.
3.2 Section 75 of the Customs Act, 1962 provides that drawback should be allowed of duties of customs chargeable under the Customs Act on any imported materials of a class or description used in the manufacture or processing of such goods or carrying out any operation on such goods,.as the Central Government may, by notification in the Official Gazette specify. Notification No. 7 of 2020 dated 28.01.2020 puts a bar on claiming All Industry Rate of drawback on goods manufactured partly or wholly in a warehouse under section 65 of the Customs Act, 1962. However, Rules 6 of the Customs and Central Excise Duties Drawback Rules, 2017 notified vide Notification No. 88 of 2017 provides cases where amount or rate of drawback has not been determined. ‘The Applicant therefore believes that it is eligible to claim drawback under Rule 6 on the export of goods which have been manufactured in the MOOWR unit using duty paid inputs / raw materials either imported or procured locally. As per para 4.03 oldie Foreign Trade Policy read with relevant Customs Notification, Advance Authorization is issued to allow duty free import of input, which is physically incorporated into export product. The Applicant believes that they arc eligible to use Advance Authorization scheme for Import of raw materials (listed out by the applicant in the said application) into the MOOWR unit which would be used for manufacture of finished goods (listed out by the applicant in the said application) and thereafter exported by BSCL or BSL to fulfil the export obligation. Further, EPCG Scheme allows import of capital goods for pre-production, production and post-production at zero customs duty. Capital goods imported under EPCG Authorization for physical exports are also exempt from IGST and Compensation Cess, as provided in the notification issued by Department of Revenue. The Applicant believes that it can debond the capital goods warehoused into the MOOWR unit by using EPCG authorization.
3.3 The applicant has submitted that Section 75 of the Customs Act read with The Customs and Central Excise Duties and Drawback Rules, 2017 (the Duty Drawback Rules) provide for Duty Drawback of imported material used in the manufacture of exported goods. As per Section 75 of the Customs Act, read with the Duty Drawback Rules, there arc 3 different ways of claiming Duty Drawback:
(i) Draw Back as per All Industry Rate of Duty Drawback (as per Rule 3 and Rule 4 of the Duty Drawback Rules)
(ii) Draw Back as per Brand rate (Rule 6 of the Duty Drawback Rules)
(iii) Drawback as per Special Brand Rate (Rule 7 of the Duty Drawback Rules)
As per Section 75 of the Customs Act read with Rule 3 and Rule 4 of the Duty Drawback Rules, the Central Government is empowered to determine the rate or amount of duty drawback in case duty paid imported materials are used in manufacture of exported product. The proviso to Rule 3(1)(c) provides that no duty drawback shall be allowed in case the exported goods arc produced or manufactured using imported materials on which customs duties have not been paid. In exercise of the powers contained in Section 75 and the Duty Draw Back Rules, the Government vide Notification No. 7/2020-Custom (N.T) dated 28/01/2020 has specified the rates and condition for All Industry Rate (AIR) of Duty Drawback. Clause 9(i) of the aforesaid notification specifies that AIR i.e. duty drawback rates specified in the notification shall not be applicable for goods which are manufactured partly or wholly in a warehouse registered under section 65 of the Customs Act. 1962. The applicant submitted that therefore it appears that Duty drawback cannot be claimed at AIR rates for goods manufactured by a unit licensed as bonded area under Manufacturing and Other Operations in Warehouse Regulations 2019 (MOOWR).
3.4 The applicant further submitted that AIR can be fixed only for standard goods. It cannot he fixed for special type of products. In such cases, brand rate is fixed under Rule 6 of Customs and Central Excise Drawback Rules, 2017. The applicant submits that Rule 6 does not restrict filing of application for fixation of brand rate for goods that are manufactured in a bonded warehouse.
Relevant extract of Rule 6 of above rules is as follows:
6. Cases where amount or rate of drawback has not been determined:
(1) (a) Where no amount or rate of drawback has been determined in respect of any goods, any exporter of such goods may, within three months from the date relevant for the applicability of the amount or rate of drawback in terms of sub-rule (3) of rule 5, apply to the Principal Commissioner of Customs or Commissioner of Customs, cis the case may be, having jurisdiction over the place of export, for determination of the amount or rate of drawback thereof stating all the 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:
Provided that-
(i) in case an exporter is exporting the aforesaid goods from more than one place of export, he shall apply to the Principal Commissioner or Commissioner of Customs, having jurisdiction over any one of the said places of export;
(ii) the Assistant. Commissioner of Customs or Deputy Commissioner of Customs, as the case may he, may extend the aforesaid period of three months by a period of three months and the Principal Commissioner of Customs or Commissioner of Customs, as the case may be, may further extend the period by a period of six months;
(iii) the Assistant Commissioner of Customs or Deputy Commissioner of Customs or Principal Commissioner of Customs or Commissioner of Customs, as the case may be, may, on an application and after making such enquiry as he thinks fit, grant extension or refuse to grant extension after recording in writing the reasons for such refusal:
(iv) an application fee equivalent to 1% of the FOB value of exports or one thousand rupees whichever is less, shall be payable for applying for grant of extension to the Assistant Commissioner of Customs or Deputy Commissioner of Customs, as the case may be and an application fee of 2% of the FOB value or two thousand rupees whichever is less, shall be payable for applying for grant of extension to the Principal Commissioner of Customs or Commissioner of Customs, as the case may be.
(b) On receipt of an application under clause (a), the Principal Commissioner of Customs or Commissioner of Customs, as the case may he, shall, after making or causing to be made such inquiry as it deems ill, determine the amount or rate of drawback in respect of such goods.
3.5 The applicant further submits that Rule 7 also does not restrict filing application for fixation of brand rate for goods that arc manufactured in a bonded warehouse and exported thereafter. Rule 7 of Customs and Central Excise Duties Drawback Rules 2017 refers to fixation of Special Brand Rate. Relevant extract of the said provision is provided herein below:
7. Cases where amount or rate of drawback determined is mentioned below:
(1) Where, in respect of any goods, the exporter finds that the amount or rate of drawback determined under rule 3 or, as the case may be, revised under rule 4, for the class of goods is less than eighty percent of the duties paid on the materials or components used in the production or many facture of the said goods, he may, except where a claim for drawback under rule 3 or rule 4 has been made, within three months from the date relevant for the applicability of the amount or rate of drawback in terms of sub-rule (3) of rule 5, make an application to the Principal Commissioner of Customs or Commissioner of Customs, as the case may be, having jurisdiction over the place of export, for determination of the amount or rate of drawback thereof 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:
Provided that –
(i) in case an exporter is exporting the aforesaid goods from more than one place of export, he shall apply to the Principal Commissioner or Commissioner of Customs, having jurisdiction over any one of the said places of export;
(ii) the Assistant Commissioner of Customs or Deputy Commissioner of Customs, as the case may be, may extend the aforesaid period of three months by ci period of three months and that the Principal. Commissioner of Customs or Commissioner of Customs, as the case may be, may further extend the period by a period of six months;
(iii) the Assistant Commissioner of Customs or Deputy Commissioner of Customs or Principal Commissioner of Customs or Commissioner of Customs, as the case may be, may, on an application and alter making such enquiry as he thinks fit, grant extension or refuse 10 grant extension after recording in writing the reasons for such refusal:
(iv) an application fee equivalent to 1% of the FOB value of exports or one thousand rupees whichever is less, shall be payable for applying for grant of extension to the Assistant Commissioner of Customs or Deputy Commissioner of Customs, as the case may be and an application fee of 2% of the FOB value or two thousand rupees whichever is less, shall be payable for applying for grant of extension by the Principal Commissioner of Customs or Commissioner of Customs, as the case may be.
3.6 Further, the applicant has relied upon the following judgements:
– M/s. First Garments Manufacturing (India) P Ltd v/s The Joint Secretary to the Government of India, Ministry of Finance (Madras High Court W.P.(MD)No. 5674 of 20071
– Leela Scottish Lace Ltd. vs Commr. Of Customs 2003 (159) ELT 477 ‘Fri Bang]
The applicant submits that in the case of M/s First Garments (cited supra) the assessee had claimed duty drawback with respect to the export of goods manufactured at 100% FOU (bonded warehouse) under a job work arrangement. The duty drawback so claimed by the M/s. First Garments was sought to be recovered by jurisdictional customs authorities. The assessee filed an appeal against the order of the jurisdictional customs authorities, the appellate authority after review of the relevant provisions reversed the order of the jurisdiction authorities. The said authorities thereafter preferred a revision application with the Joint Secretary, Ministry of Finance against the appellate order. The Government of India vide the revised order disallowed the duty drawback claimed under the AIR rate and allowed duty drawback as per the brand rate of 5%.
Similarly in case of Leela Scottish (cited supra), the Company had claimed the duty drawback as per the AIR rates, with respect to the export of goods, manufactured by a 100% FOU under a job work arrangement. In the aforesaid case also, the jurisdictional authorities had sought to deny the duty drawback on the grounds that duty drawback as per AIR rates cannot be claimed for goods manufactured at. 100% EOU while raise of demand order, the Commissioner has held that with respect to goods manufactured at 100%EOU (under job work arrangement) DTA unit is eligible for brand rate of drawback and in such cases, drawback will be admissible. The Commissioner had further held that Leela Scottish had not made any application and no brand rate was fixed and hence duty drawback claims filed by Leela Scottish arc liable to be rejected.
The applicant has also made reference to the decision of Goedieke (1) Private Limited vs. Commr. Of Customs, Bangalore [2002 (144) ELT 91 (Tribunal)] wherein it has been held that on re-export, the private warehouse is eligible to claim duty drawback of customs duly paid after the warehousing period of goods has expired, in terms of Section 74 of the Customs Act.
3.7 The applicant further submits that The Government vide Circular No. 31/2000-Cus, F. No. 609/41/2000-DBK, dated 20th April 2000 had clarified that DTA exporters will be eligible fbr grant of duty drawback against duties suffered on inputs processed by EOU/SPZ units for manufacture of goods which are exported. The Circular further informs that DTA exporters will be eligible for payment of Brand Rate of Drawback.
3.8 The applicant has further made a reference to Para 9 of Circular No. 48/201 1 Cus. Dated 31 October 2011, where it has been clarified as follows:
“9. Doubts have been expressed regarding simultaneous availment of benefits under Advance License / Advance Authorization Scheme along with All Industry Rates of duty drawback. In this regard attention is invited to the sub Kara (b) of Para (8) of the notes and conditions of the notification No. 68/2011-Cus. (NT) dated 22.09.2011. It stipulates that the All Industry Rate of drawback is not available if the goods are exported in discharge of export obligation against Advance Licence except under certain conditions. It is clarified that in general, the benefits of All Industry Rates of duty drawback and Advance Licence Scheme are not available Simultaneously. However, in such cases the exporter can always avail the brand rate of duty drawback under rule 6 or rule 7 of the Customs, Central Excise Duties and Service Mx Drawback Rules, 1995, as the case maybe and subject to the conditions stipulated therein, for the duty paid inputs used in the manufacture of export goods”.
3.9 The applicant submits that Advance ruling application and ruling thereof should not determine the date of eligibility to claim Duty Drawback under Rule 6 / Rule 7 of the Duty Drawback Rules. Once held to be eligible, the provision of the said regulation will apply and eligibility / timelines to file the application would he determined thereof’.
3.10 The applicant submits that importing goods under Advance Authorization in MOOWR premises is allowed CI3IC has clarified that partially or fully exempt imported goods may be brought into the MOOWR unit for the approved manufacturing activity. The relevant extract of Circular No 34/2019 — Cus. dated I’ October 2019 issued under F. No. 473/03/2015 -LC (pt). is as follows:
“14. The issue of procurement of imported goods that arc exempt from duty or are chargeable to nil rate of duty into a warehouse operating under section 65 has also been raised. The objective of section 65 is to enable manufacture and other operations in customs bonded warehouses: For this purpose, the units should be able to procure required raw materials, consumables, capital goods etc., imported or procured from domestic market. The goods may include dutiable goods, exempt goods or those chargeable to nil rate of duty. Denial of the facility to exempt goods or those chargeable to nil rate of duty, which may be required for manufacturing, would defeat the objective of Section 65. It is therefore clarified that imported goods, that arc exempt from duty or arc chargeable to nil rate of duty, may be brought into the warehouse, upon filing a bill of entry for home consumption and clearance, at the customs station of import. Such goods shall not be considered as warehoused goods in terms of section 60 ofthe Act–.
The applicant submits that given the above clarification, the Applicant from MOOWR unit can avail the exemption of Advance Authorization on imported material subject to fulfilment of applicable conditions / eligibility under the applicable customs notification and bring such goods into the MOOWR premises for use in manufacture of export goods.
3.11 The applicant further submitted that use of EPCG license to debond capital gods from the MOOWR premises has not been restricted under the MOOWR regulations. The applicant has referred to CBIC clarification vide FAQ dated 27 October 2020. The relevant extract of the clarification is as below:
“17. Can all export benefits under FTP and Customs (Import of Goods at Concessional Rate of Duty) Rules, 2017 (IGCR) be taken in Bonded warehouse simultaneously?
Response: The eligibility to export benefits under FTP or IGCR would depend upon the respective scheme. If the Scheme allows, a unit operating under Section 65 has no impact on eligibility. In other words, a unit operating under Section 65 can avail of any other benefit, i f the benefits scheme al lows.
The applicant submits that given the above and the fact that there is no restriction for use of EPCG license to pay duty of goods debonded from MOOWR premises under the MOOWR regulations, the Applicant can apply for EPCG license and debond the capital goods imported under the MOOWR license by utilizing the said EPCG license for payment of customs duty on such debonding of capital goods.
3.12 Further, the applicant draws reference to the provisions of ‘Third Party Exports’ contained in FTP 2023-
Para 2.42 of FTP 2023: Third Party Exports
Third party exports (except Deemed Export) as defined in Chapter I 1 shall be allowed under FTP. In such cases, export documents such as shipping bill shall indicate name of both manufacturing exporter/manilacturer and third-party exporter(s). e- Bank Realization Certificate (e-BRC) or export Realizations from RBI’s EDPMS wherever available in DGFT IT Systems, Export Order and Invoice should be in the name of third-party exporter.
Para 11.61 of ITP 2023: Definition – “Third-party exports” means exports made by an exporter or manufacturer on behalf of another exporter(s). In such cases, export documents such as shipping bills shall indicate names of both manufacturer exporter/manufacturer and third-party exporter(s). Bank Realization Certificate (BRC). Self-Declaration Form (SDI:). export order and invoice should be in the name of third-party exporter.
Section 2(18) of Customs Act, 1962 defines export to be
“export’, with its grammatical variations and cognate expressions, means taking out of India to a place outside India;
Section 50 of Customs Act, 1962 provides as follows:
Entry of goods for exportation – (1) The exporter of any goods shall make entry thereof by presenting electronically on the customs automated system to the proper officer in the case of goods to be exported in a vessel or aircraft, a shipping bill, and in the case of goods to be exported by land, a bill of export in such form and manner as maybe prescribed:
In the given fact pattern, the Applicant will also sell the goods to third party who would export the goods as such. The said goods would also move directly from the premises of the Applicant to the port of export. Further the documentation would be aligned to the requirement of third-party exports under the F’l’P provisions.
The applicant has submitted that based on the above provisions in H’P 2023, the definition of exports and the fact that movement of the said goods is from the location of place of’ business of the Applicant (from the MOOWR premises) directly to the port of shipment for exports (i.e., not for DTA–clearance), the transaction of clearance of goods from MOOWR premises to third party exporter for exports thereof cannot be considered as DTA sales.
3.13 In the light of aforementioned and in its understanding the Applicant has contended that the duty drawback would be allowed from the date of the first export subject to condition that application for fixation of brand rate is filed within the specified time lines and the answers to all the questions asked by the applicant reproduced (supra) in para 1 should be ‘Yes’.
4. The concerned jurisdictional Customs Comm issionerate i.e. the Commissioner of Customs (Preventive), Vijaywada has responded to the subject application vide letters dated 18.1.0.2023 as below:
4.1 The Units operating under section 65 read with section 58. of: the Customs Act are entitled to import capital goods; machinery, inputs etc. without payment of duty or deferred payment of duty by –following the provisions under Chapter IX. In so far as domestic procurement is concerned; applicable rates of taxes shall be payable and exemptions, if any, can also be availed. By virtue of simply being a unit operating under section 65, they shall not be entitled to procure goods domestically without payment of taxes.
4.2 Since the warehouse operating under section 65 also functions as a warehouse licensed under section 58,– the licensee can clear imported goods as such in to DTA or for home consumption under section 68 only on payment of import duties along with interest as per sub-section (2).of section 61 of the Act or clear them as such for export under section 69 of the Act. Depreciation of the duties for calculation of applicable duties at the time of debonding or the capital goods as allowed in the FPCG scheme is nowhere prescribed/allowed in the MOOWR Scheme as per the said regulations. notifications and Circulars issued there under.
4.3 The unit may import Inputs on Payment of duty; keep in their Warehouse; use duty paid Inputs for manufacturing of their final products and may export the resultant Product from their ware house. But, the MOOWR Scheme on a whole prohibits to avail the Duty Drawback benefits. Hence, duty drawback cannot be claimed by MOOWR unit even though the raw materials are imported on Payment of Duty.
4.4 The benefits of the said schemes i.e., MOOWR/EPCG/ Duty Drawback arc independent in nature governed by respective laws and authorities and they cannot be clubbed with one another and cross utilisation of the schemes is not allowed. If the applicant wants to import the Capital goods under Advance/EPCG authorisation and keep in their factory for manufacturing of their final products and also if they want to claim duty drawback benefits on the duty paid inputs used in the manufacture of their resultant products, they can do it, but only after de bonding of the capital goods already received under MOOWR Scheme by paying all the applicable duties along with interest without claiming any depreciation of the Capital goods used thereof and also only after surrendering/ Cancellation of their MOOWR licence.
5. On 11.12.2023 the applicant has submitted rebuttal on the above submissions dated 18.10.2023 made by the jurisdictional Commissioner as below:
5.1 At the outset, the Applicant states that the jurisdictional Commissioner appears to have mis-construed the query asked as part of the Advance Ruling. The query does not pertain to admissibility of depreciation benefits at the time of de- bonding as is admissible to EPCG scheme. The query is only whether at the time of dc-bonding of capital goods under the MOOWR Scheme, when the Applicant is required to pay appropriate customs duties, whether the benefit of exemption notified vide Notification No. 26/2023 Customs dated 1st April 2023 can be availed by the Applicant. There is nothing in the provisions of law (either under the MOOWR scheme or the EPCG scheme) which prohibits claim of such exemption. The exemption under Notification No. 26/2023 Customs dated l’ April 2023 should be admissible if the conditions stipulated in the said notification arc fulfilled by the Applicant. Applicant further states that it is in a position to comply with all conditions prescribed under Notification No. 26/2023 Customs dated 1St April 2023 at the time of debonding of capital goods from MOOWR scheme and therefore there is no reason as to why the benefit should be denied to the Applicant. The Notification No. 26/2023 is an exemption notification and it is trite that any exemption ‘notification should be construed strictly at the threshold. The Hon’ble Supreme Court in the case of Union of India v. Wood Papers Limited, (1990) 4 SCC 256 = 1990 (47) E.LT. 500 (S.C.) made a distinction between stage of finding out the eligibility to seek exemption and stage of applying the nature of exemption. Relying on the decision in Collector of Central Excise v. Parle Exports (P) Ltd., (1989) 1 SCC 345, it was held “Do not extend or widen the ambit at the stage of applicability. But once that hurdle is crossed, construe it liberally”. This decision has been relied upon and approved by the Honible Supreme Court in the case of Dilip Kumar & Company, 2018 (361) E.L.T. 577 (S.C.).
5.2 The applicant said that form the CBIC clarification vide FAQ dated 27.10.2020 (reproduced supra) it is crystal clear that there is no bar to the availment of benefit under Notification No. 26/2023 customs dated April 2023 at the time of debonding of goods under MOOWR and the jurisdictional Commissioner cannot impose any which is not envisaged under the provisions of the Customs Act, 1962 in general and the MOOWR in particularly.
5.3 The applicant submitted that the jurisdictional Commissioner has grossly erred in stating that the MOOWR scheme as a whole prohibits availment of the duty drawback benefits. There is no provision in the MOOWR Scheme which imposes such restrictions. Applicant has relied upon decisions given in the context of EOU wherein the benefit of drawback is allowed. The decisions unambiguously convey the position that there is no restriction in law for EOU to claim drawback benefits. There is no reason as to why similar interpretation should not be adopted in the Applicant’s case as well. Circular No. 31/2000-Cus. F.NO. 609/41/2000-DBK, dated 20th April 2000 wherein the CBIC had clarified that DTA exporters will be eligible for grant of duty drawback against duties suffered on inputs processed by F,OU I SPZ units for manufacture of goods which are exported. The Circular further confirms that DTA exporters will be eligible for payment of Brand Rate of Drawback.
5.4 The applicant states that the jurisdictional Commissioner has grossly erred in stating that the benefits of MOOWR/EPCG/Duty Drawback are independent in nature and they cannot be clubbed together for the purpose of cross utilisation. This view is directly in the teeth of Para 9 of Circular No. 48/2011-Cus dated 31.10.2011 (reproduced in para 3.8 supra).
6. On 27.12.2023 in reply to the rebuttals dated 11.12.2023 submitted by the applicant, the concerned Commissionerate submitted that the stand taken by their office holds good and if the Applicant proposes to avail various schemes i.e., MOOWR/EPCG/Duty Drawback under respective notifications simultaneously in their unit, they can avail, but the said schemes are independent in nature governed by respective laws and authorities and they cannot be clubbed with one another and cross utilization of the schemes for paying respective duties is not allowed. II the applicant wants to import the Capital goods under Advance or ITCG authorisation and keep in their factory for manufacturing of their final product and also if they want to claim duty draw back benefits on the duty paid inputs used in the manufacture of their resultant products, they can do it, but only after de bonding of capital goods already received under MOOWR Scheme by paying all the applicable duties along with interest without claiming any depreciation of the Capital goods used thereof and also only after surrendering/ Cancellation of their MOOWR Licence. Basically the concept of MOOWR Scheme is “Deferment of duty payment” i.e., Units operating under MOOWR Scheme can keep the imported goods either Capital goods or raw materials in their factory as long as they want without any time restriction. But, if they want to clear the goods in Domestic Tariff area, they have to pay all the applicable Customs duties that were foregone at the time of import of the goods and no duties are to be paid for export of the same. The applicant’s unit operating under MOOWR Scheme is termed as a DTA unit only for all practical reasons and purposes and it is not an SU or 100% HOU. Therelbre, the manufactured goods supplied/cleared by them to their customers would come under category of DTA Sale only.
7. On 05.01.2024 the applicant has submitted rebuttal on the comments dated 27.12.2023 of the jurisdictional Commissioner. The applicant has submitted that the jurisdictional officer appears to have taken a stand contrary to what was communicated in their earlier communication. In the earlier communication it was communicated that MOOWR scheme on a whole prohibits availment of drawback benefits. In the latest comments offered vide their letter dated 27.12.2023, it is stated that if the applicant proposes to avail various schemes i.e. MOOWR/F.PCG/Duty Drawback under the respective notifications simultaneously, they can avail, but the said schemes are independent in nature governed by the respective laws and authorities and they cannot be clubbed with one another and cross utilisation of the schemes for paying respective duties is not allowed. The jurisdictional officer has not quoted any provisions of law which prohibits such cross utilisation. The understanding of the jurisdictional officer is also contrary to the CBIC clarification vide FAQ dated 27 October 2020. The jurisdictional Commissioner has stated that if the Applicant wants to clear the goods in the domestic tariff area, they have to pay all the applicable customs duties that were foregone at the time of import. There is no quarrel with this proposition. The query of the applicant is that whether at the time of debonding such duties can be paid by availing benefit of an exemption notification under the EPCG scheme. At the time of payment of customs duties (during the debonding exercise), if the Applicant is entitled to avail any notification benefit, there is no reason as to why the same should not be permitted. The view given by the jurisdictional officer is contrary to the express provisions of para 2.42 of the Foreign Trade Policy (F’l’P) 2023 which perm its such third party exports.
8. Personal hearings in the matter were conducted on 12.12.2023 and 08.01.2024 in office or the CAAR, Mumbai wherein the authorized representatives Shri Sanjeev Nair, Shri Shreeni Pillai and Shri Anand Parasrampuria were present for the applicant M/s. Blue Star Climatech limited. They reiterated their written submission filed with the application. They contended that all of the (08) questions asked in the application arc fit to be answered in their favour. The department was represented by Joint Commissioner of Customs, Ms. Sowmya Nuthalapati who reiterated their written submission provided on 27.12.2023 and 18.10.2023 and submitted that schemes cited by the applicant are independent schemes and cannot be clubbed. The representatives of the applicant reiterated the case laws already cited in the application.
9. I have taken into consideration all the materials placed on record in respect of the subject (08) questions including submissions made by the applicant during the course of both the personal hearings. I have gone through the submissions received from the jurisdictional Comm issionerate and the rebuttals to that filed by the applicant. I therefore proceed to decide the present application and to answer all the (08) questions asked by the applicant on the basis of the information on record as well as the existing legal framework.
I have gone through the questions no. (i) to (v) reproduced (supra) and it is observed that these five (05) questions are asked in respect of ‘duty drawback’. Observations, discussions and findings of this authority, in this regard, arc as follows from para 10.1 to 10.10:
10.1 First and foremost, it is pertinent to examine whether any such jurisdiction of pronouncing ruling as to the question of duty drawback is vested in this Authority or otherwise. The questions on which the advance ruling can be sought are listed out in sub-section (2) of Section 2811 of the Customs Act, 1962 which inter alia includes the question of ‘applicability of notifications issued in respect of tax or duties under this Act or the Customs Tariff Act, 1975 or any tax or duty chargeable wider any other law for the time being the force in the same manner as duty of customs leviable under this Act or the Customs Tariff Act’. Central Government has notified Customs and Central Excise duties drawback Rules, 2017 vide Notification No. 88/2017-Cus. (N.T.) dated 21.09.2017in exercise of the powers conferred by Section 75 of the Customs Act. 1962 and Section 37 of the Central Excise Act, 1944.
10.2 The applicant is of the view that their application is in conformity with the clause (d) of sub-section 2 of the section 2811 of the Customs Act, 1962. The applicant hils Further contended that the questions involved in the instant application which are in respect of drawback falls under the jurisdiction of the Customs Authority for Advance Ruling to decide; and that their application is fit for seeking advance ruling on the question of drawback; and that since the eligibility to claim drawback on export goods is directly related to the duty discharged on the inputs used for its manufacture, the same would fall under the category of Section 2811(2)(d) i.e. “applicability of notifications issued in respect of tax or duties under this Act or the Customs Tari ft– Act, 1975 (51 of 1975)”.
10.3. As per clause (d) of sub-section 2 of the section 2811 of the Customs Act, 1962, the questions on which the Advance Ruling can be sought shall be in respect of, –
(a) classification of goods under the Customs Tariff Act, 1975;
(b) applicability of a notification issued under sub-section (1) of section- 25, having a bearing on the rate of duty;
(c) the principles to be adopted for the purposes of determination of value of the goods under the provisions of the Customs Act, 1962
(d) applicability of notifications issued in respect of tax or duties under this Act or the Customs Tariff Act, 1975 or any tax or duty chargeable under any other law for the time being in force in the same manner as duty of customs leviable under this Act or the Customs Tariff Act;
(e) determination of origin of the goods in terms of the rules nod fled under the Customs Tariff Act, 1975 and matters relating thereto.
(f) any other matter as the Central Government may, by notification, specify
10.4 As is clear from the applicant’s questions no. (i) to (v) reproduced (supra) the matter does not pertain to classification of goods under the Customs `Tariff Act, 1975 or to the grant of exemptions of duty under section 25(0 of the Customs Act, 1962 and these questions arc neither concerned with the valuation nor with origin of imported goods. In plain meaning. the issue also does not pertain to applicability of notifications issued in respect of tax or duties under this act or the Customs Tariff Act, 1975 or any tax or duty chargeable under any other law for the time being in force in the same manner as duty of customs leviable under this act or the Customs Tariff Act, 1975. I lowever, in view of the clause (f) reproduced above, during the personal hearings representatives of the applicant were asked, if there is any notification which have specified other questions under the purview of this Authority, for that their reply was in negative. On perusal of the other clauses i.e. (a). (b), (c) and (e), it is quite obvious that the case in hand does not pertain to these clauses.
10.5 However, clause (d) is worth discussing before passing any ruling in respect of the case in hand. The applicant has not considered the importance of the words ‘in respect of, ‘chargeable’ and ‘leviable’ mentioned in that clause in totality. A clause of any statute must be read as a whole and it must be interpreted in a complete and comprehensive way, mere focusing on some words for sake of convenience is not a right approach. I am of the view that opening lines of the clause (d) arc also equally important to decide the case in hand. Rest of the portion of the clause (d) whereupon the learned advocates present for the applicant have not drawn attention are “applicability of Notification issued .1975, or any tax or duty chargeable under any other law for the time being, in force in the same manner as duty of customs leviable under this Act or the Customs Tariff Act”. Interpretation of the clause (d) is incomplete without considering the words ‘Notification’, ‘tax or duties’, ‘chargeable’ and ‘leviable’.
It is very clear that the wordings used in the opening lines of the clause (d) of section 28(H) (2) starts with “applicability of notifications” issued in respect of:
(i). tax or duties under Customs Act, 1962 or
(ii) tax or duties under the Customs Tariff Act, I 975 or
(iii) any tax or duty, chargeable under any other law for the time being in .force in the same manner as duty of customs leviable under this Act or the Customs Tariff Act”.
Further. as per the dictionary meaning of the term “in respect of” simply means in connection with. The courts also have interpreted the phrase “in respect of to mean connected with or attributable to. Thus, this clause is only .connected with the Notification issued in respect of tax or duty under the Customs Act, 1962 or under the Customs Tariff Act,. 1975 or any tax or duty chargeable under any other law for the time being in force in the same manner as duty of customs leviable under this Act or the Customs Tariff Act. Needless to say that the duty under the Customs Act is charged and levied in terms of Section 12 of the Customs Act read with Section 2 and/or 3 of the Customs Tariff Act, 1975.
It is further important to note that the term duty is defined under Customs Act, 1962 as per follows:
“2. Definitions
In this Act. unless the context otherwise requires-
(15) “duty” means a duty of customs leviable under this Act”.
… ….Emphasis Supplied
10.6. On the other hand, drawback is defined under Section 2(a) of the Drawback Rules, 2017 as:
“2. (a) “drawback” in relation to any goods manufactured in India and exported, means the rebate of duty excluding integrated tax leviable under sub-section (7) and compensation cess leviable under sub-section (9) respectively of section 3 of the Customs Tariff Act, 1975 (51 of 1975) chargeable on any imported materials or excisable goods used in the manufacture of such goods.”
From this definition of drawback, it is amply clear that drawback is a rebate of duty and it is not a levy of duty, whereas, clause (15) of section 2 of the Customs Act, 1962 defines `duty’ as a duty of customs leviable under this Act.
10.7 The provision relating to the refund of duty is specifically provided under the express provision of section 27 of the Customs Act. 1962.
Proviso to sub-section 2 of section 27 under the act reads as follows:
“PROVIDED that the amount of duty and interest, if any, paid on such duty as determined by the Assistant Commissioner of Customs or Deputy Commissioner of Customs under the foregoing provisions of this sub-section shall, instead of being credited to the Fund, be paid to the applicant, if such amount is relatable to-
(a) …………….
(b) …………….
(c) …………….
(d) …………….
(e) drawback of duty payable under sections 74 and 75;
On conjoint reading of definition 2(a) of the Drawback Rules; 2017 and the provision relating to refund of duty under section 27 (2)(e). it emerges that drawback is rebate of duty that is payable under section 74 and 75 of’ the Customs Act, 1962, whereas, duty means duty of customs leviable under section 12 of the Customs Act, 1962.
10.8 Chapter V of the Customs Act, 1962 is about “Levy of, and exemption from, customs duties”. Further, under this chapter sub-section (1) of section 12 reads as follows:
“12. Dutiable goods
(1) Except as otherwise provided in this Act, or any other law Ibr the time being in Ibrce, duties of customs shall be levied at such rates as may he .specified under the Customs Tariff Act, 1975 (51 of 1975) or any other law fbr the time being in force, on goods imported into, or exported from,, India”.
Similarly Section 2 of the Customs Tariff Act, 1975 reads as follows:
“SECTION 2. Duties specified in the Schedules to be levied- The rates at which duties of customs shall be levied under the Customs Act, 1962 (52 or 1962), arc specified in the First and –Second Schedules”.
In fact, the chargeability/leviability of tax or duties and playability of refund/drawback arc two different sets of mechanism under Custom Act for which separate provisions are made. It can be seen that the notification governing the Drawback Rules, 2017 has been issued by the Central Government in exercise of the powers conferred by section 75 of the Customs Act, 1962 (52 of 1962) and section 37 of the Central Excise Act. 1944 (1 of 1944), and not under the power vested under section 12 of the Customs Act or section 2 or 3 of the Customs Tariff Act. In the present case the matter on which Advance Ruling. is sought pertains to duty drawback, which is a kind of refund of duty and not a levy of duty. It is also to understand that provision related to the power of Central Government to grant exemption from duty is enumerated under section 25 of the Customs Act, 1962. Exemption is a kind of reduction or removal of compulsory duty leviable that would ‘otherwise be imposed on import/export and any question related to this aspect is specifically covered under clause (b) Of the sub-section 2 of section 28(11) of the Customs Act, 1962, whereas, the words refund/rebate/drawback arc not expressly envisaged under the provision of the section 28(H)(2)(d) of the Custom Act inasmuch as all the provisions here arc related to the questions having a bearing on rate of duty leviable on import/export. The terms used ‘leviable’ and ‘payable’ are differently constructed and are not interchangeable and cannot misunderstood to be one and the same, neither the same is the intention of the government.
Further, the primary rule of constructing statutes is to construct its provisions literally and grammatically giving the .words their ordinary and natural meaning. According to this cardinal rule the words, phrases and sentences of the statutes arc to be understood in their natural, ordinary or popular and grammatical meaning, unless such a construction leads to. an absurdity or the statute suggests a different meaning..Every word in the law should be given meaning as no word is unnecessarily used. Nothing is to added to or taken from a statute unless there are adequate ground to justify the interference.
10.9 In the case of WS. Grasim Industries Limited vs. Collector of Customs, Bombay, 2002, the Hon’ble Supreme Court has observed that “No words or expressions used in any statute can be said to be redundant or superfluous. In matters of interpretation one should not concentrate too much on one word and pay too little attention to other words. No provision in the statute and no word in any section can be construed in isolation. Every provision and every word must he looked at generally and in the context in which it is used. It is said that every statute is an edict of the legislature. The elementary principle of interpreting any word while considerine a statute is to gather the mens or sententia legis of the legislature. Where the Words are clear and there is no obscurity, and there is no ambiguity and the intention of the legislature is clearly conveyed, there is no scope for the Court to take upon itself the task of amending or alternating the statutory provisions. Wherever the language is clear the intention of the legislature is to be gathered from the language used. While doing so what has been said in the statute as also what has not been said has to be noted. The construction which requires for its support addition or substitution of words or which results in rejection of words has to be avoided.
It is understood that in the clause (d) of the sub-section 2 of the section 28(1-1) of the Customs Act, 1962 there is not any mention of the word ‘drawback’ or refund with the words duty or tax. I lowever, it is amply clear that the words ‘chargeable’ and ‘leviable’ arc expressly mentioned in the same clause and it is observed that these words arc associated with the words duty and tax. Therefore, addition of the word ‘drawback’ with the words duty or tax would be unwarranted and extraneous.
Further, in the case of Flarshad Chiman Lal Modi vs. DU’ Universal Ltd. (2005) 7 SCC 791, the llon’ble Supreme Court held that “where a court has no jurisdiction over the subject-matter of the suit by reason of any limitation imposed by statute, charter or commission, it cannot take up the cause or matter. An order passed by a court having no jurisdiction is a nullity.
10.10 Iii view of the above discussions and provisions, I have arrived at the conclusion that the questions no. (i) to (v) (reproduced supra) involved in the present application do not jail within the ambit of any parameter, on which Advance Ruling can be sought.
11. I have gone through the Circular No. 34/2019 – Cus. dated 1stOctober 2019 issued under F. No. 473/03/2015 -1,C (pt). and Para 14 thereof is reproduced as under for ready reference:
“14. The issue of procurement of imported goods that are exempt from duty or are chargeable to nil rate of duty into a warehouse operating under section 65 has also been raised. The objective of section 65 is to enable manufacture and other operations in customs bonded warehouses. For this purpose, the units should be able to procure required raw materials, consumables, capital goods etc., imported or procured from domestic market. The goods may include dutiable goods, exempt goods or those chargeable to nil rate of duty. Denial of the facility to exempt goods or those chargeable to nil rate of duty, which may be required for manufacturing, would defeat the objective of Section 65. It is therefore clarified that imported mcis that are exempt from duty or are chargeable to nil rate of duty, may be brought into the warehouse, upon filing a bill of entry for home consumption and clearance, at the customs station of import. Suckgoods shall not be considered as warehoused goods in terms of section 602f the Act”.
As per Section 2 of the Customs Act, 1962, definition of “imported goods’. is as under:
“imported goods” means any goods brought into India from a place outside India but does not include goods which have been cleared for home consumption.
…. …. …. Emphasis Supplied
Para 14 of Circular No. 34/2019 — Cus. dated I’ October 2019 clarifies that imported goods, that are exempt from duty or are chargeable to nil rate of duty, may be brought into the warehouse, but with the condition that these goods may be brought upon filing a bill of entry for home consumption. Board has further clarified that such goods shall not be considered as warehoused goods in terms of section 60 of the Act.
This clarification leaves no iota of doubt that filing a bill of entry for home consumption is mandatory to bring imported goods, that arc exempt from duty or are chargeable to n i I rate of duty into the warehouse operating under section 65. Therefore, the contention of the applicant that bringing the imported goods into its MOOWR unit against Advance Authorisation Scheme may be allowed is right but with the condition that said goods are brought into its MOOWR unit upon filing bill of entry for home consumption only.
Therefore, to avail the benefit of exemption notification no. 21/2023 dated 01.04.2023, filing a Bill of Entry for home consumption is mandatory. Once the benefits of the Advance Authorisation scheme are claimed by the applicant, then. the goods imported under said Advance Authorisation shall not be considered as warehoused goods in terms of section 60 of The Customs Act.
12. The Applicant believes that it can debond the capital goods warehoused into the MOOWR unit by using FPCG authorization. The applicant has clarified that the query does not pertain to admissibility of depreciation benefits at the time of de- bonding as is admissible to EPCG scheme, rather, the query is only whether at the time of dc-bonding of capital goods imported under the MOOWR Scheme, when the applicant is required to pay appropriate customs duties, whether the benefit of exemption notified vide Notification No. 26/2023 Customs dated April 2023 can be availed by the Applicant.
12.1 Further, I have also gone through the relevant chapters of the current Foreign Trade Policy (FTP) to decide the case at hand. Para 2.36 of the FTP is reproduced as under for ready reference:
2.36 Private/Public l3onded Warehouses for Imports:
(a) Private/ Public bonded warehouses may he set up in DTA as per rules, regulations and notifications issued under the Customs Act, 1962. Any person may import goods except prohibited items, arms and ammunition, hazardous waste and chemicals and warehouse them in such bonded warehouses.
(b) Such goods may be cleared for home consumption in accordance with provisions of FTP and against Authorisation, wherever required. Customs duty as applicable shall be paid at the time of clearance of such goods.
(c) The clearance of the warehoused goods shall be as per the provisions of the Customs Act, 1962.”
From the above, it is observed that goods ‘warehoused’ in ‘Private/Public Bonded Warehouses’ may be cleared for home consumption in accordance with provisions of FTP and against Authorisation, wherever required. Customs duty as applicable shall he paid at the tinic of clearance of such goods. Terms mentioned here are ‘warehoused’ in ‘Private/Public Bonded Warehouses’. however. it is quite obvious that the applicant is contemplating to bring capital goods into a MOOWR unit.
12.2 Private Bonded warehouses are licensed under the provisions of section 58 of the Customs Act, 1962, Public Bonded warehouses arc licensed under the provisions of section 57 ibid and MOOWR warehouses are licensed under the provisions of section 65 ibid. Definitions of these three warehouses are reproduced as under:
57. Licensing of public warehouses:
The Principal Commissioner of Customs or Commissioner of Customs may, subject to such conditions as may be prescribed, licence a public warehouse wherein dutiable goods may be deposited.
58. Licensing of private warehouses:
The Principal Commissioner of Customs or Commissioner of Customs may, subject to such conditions as may be prescribed, licence a private warehouse wherein dutiable goods imported by or on behalf of the licensee may be deposited.
65. Manufacture and other operations (MOOWR) in relation to goods in a warehouse:
(1) With the permission of the Principal Commissioner of Customs or Commissioner of Customs and subject to such conditions as may be prescribed, the owner of any warehoused goods may carry on any manufacturing process or other operations in the warehouse in relation to such goods.
(2) Where in the course of any operations permissible in relation to any warehoused goods under sub-section (1), there is any waste or refuse, the following provisions shall apply:-
(3) if the whole or any part of the goods resulting from such operations are exported, import duty shall be remitted on the quantity of the warehoused goods contained in so much of the waste or refuse as has arisen from the operations carried on in relation to the goods exported:
PROVIDED that such waste or refuse is either destroyed or duty is paid on .,Lich waste or refuse as if it had been imported into India in that form;
(b) if the whole or any part of the goods resulting from such operations are cleared from the warehouse for home consumption, import duty shall be charged on the quantity of the warehoused goods contained in SO much of the waste or refuse as has arisen from the operations carried on in relation to the goods cleared for home consumption.
Further, as per Section 2 of the Customs Act, 1962, ‘warehoused goods’ are defined as any goods which are deposited in a warehouse.
From the above discussed provisions, it is amply clear that all the three warehouses are set up under different provisions of the Act and they have their own procedures. Public and Private Bonded warehouses are set up to only deposit the goods and not any manufacturing process or other operations arc specifically provided in these two warehouses in relation to the goods warehoused therein, whereas, owner of the MOOWR units are allowed to carry on any manufacturing process or–Other operations in the MOOWR unit in relations to the goods warehoused therein. Therefore, the provisions of the Private Bonded warehouses licensed under section 58 of the Act and Private Bonded warehouses licensed under both section 58 and section 65 are on different footings and cross utilisation of the benefits granted to the owners of the such warehouses does not appear to be specifically provided in the statute.
12.3 From the above, it is observed that Para. 2.36 of the FIP is silent on the issue at hand. The applicant is contemplating to debond certain capital goods on which the benefit of deferral of customs duty for import of capital goods has been claimed under the MOOWR scheme. 1 am of the view that clause (b).of Para 2.36 of the FTP allows clearance of the goods warehoused in, Private/Public Bonded Warehouses for home consumption in accordance with provisions of F’11) and against Authorisation, wherever required, however, in the present case the applicant has already claimed the benefits of deferral of customs duty on the goods brought into its MOOWR unit. Therefore, the goods are not simply warehoused, but, the benefits of deferral of customs duty has already been claimed on the such goods. I am of the considered view that clause (b) of pars 2.36 of the VP is only about Private Bonded warehouse and Public Bonded warehouse licensed under section 58 and section 57 respectively wherein goods are warehouses/deposited and not any manufacturing process or other operations are carried in relations to such goods. However, in the case at hand, activity is different inasmuch as MOOWR unit of the applicant is licensed not only under section 58 but also under section 65 wherein any manufacturing process or other operations may he carried on in relations to the goods warehoused therein.
12.4 Further, 1 have also referred to the Frequently Asked Questions (FAQs) on Manufacture and Other Operations in Customs Warehouse available on the official website of the CI3IC (updated on 27th October 2020). FAQ No. 17 relied upon by the applicant is reproduced as under:
17. Can all export benefits under FTP and Customs (Import of Goods at Concessional Rate of Duty) Rules, 2017 (IGCR) be taken in Bonded warehouse simultaneously?
Response: The eligibility to export benefits under FTP or 1GCR would depend upon the respective scheme. If the scheme allows, unit operating under Section 65 has no impact on the eligibility. In other words, a unit operating under Section 65 can avail any other benefit, if the benefit scheme allows. .
……… Emphasis Supplied
Response to FAQ No. 17 whereupon the applicant has relied, makes it clear that the eligibility to export benefits under FIT or IGCR would depend upon the respective scheme and a unit operating under Section 65 can avail such benefits, if the benefit scheme allows. However, I find that Notification No. 26/2023 -Customs dated 01.04.2023 which exempts certain capital goods from customs duty leviable thereon, nowhere specifically extends such duty exemption benefits to the capital goods on which the benefit of deferral of customs duty has already been claimed under the MOOWR scheme. Moreover, response to FAQ No. 17 is also not supporting specifically the contention of the applicant on this particular aspect. I am of the view that the response to FAQ No. 17 has nowhere given clarification about the question asked in the present application inasmuch as this response does not cover the activity contemplated by the applicant as the applicant has already availed the benefits of deferral of customs duty on import of capital goods into its MOOWR unit.
Further, the said response has also envisaged the condition ‘if the benefit scheme allows’, in this regard, I find that the Notification No. 26/2023 -Customs dated 01.04.2023 and relevant chapter of the current FTP about EPCG scheme have also nowhere specifically covered the activity contemplated by the applicant in the present application.
I find that neither Notification No. 26/2023 -Customs dated 01.04.2023 nor Notification No. 21/2023 dated 01.04.2023, have anywhere specifically supported the understanding of the applicant with regard to question no. (vi) and (vii) asked in the present application. I am of the view that the applicant is just drawing the indirect inference from various FAQs and Circulars to vindicate its contention. I am of the considered view that mere inferences are not sufficient, but what is more important is the specific provision made in the exemptions notifications through the language used therein. In absence of specific/express provision in the Notification No. 26/2023 -Customs dated 01.04.2023 and 21/2023 dated 01.04.2023, the applicant’s claim to avail such benefits cannot be acceded to. It is a trite law that the exemptions notifications must be strictly interpreted.
13. Further, reliance is also placed upon the following observations of the Hon’ble Supreme Court of India in the case of Commissioner of Customs (Import), Mumbai vs. M/S. Dilip Kumar and Company on 30 July, 2018:
” (52) To sum up, we answer the reference holding as under
(i) Exemption notification should be interpreted strictly; the burden of proving applicability would be on the assessee to show that his case comes within the parameters of the exemption clause or exemption notification.
Similarly, observations of the Hon’ble Supreme Court in the case of’ MIS. Grasim Industries Limited vs. Collector of Customs. Bombay. 2002 as referred in para 10.9 (supra) are squarely applicable while interpreting the above notifications.
14. The applicant has submitted that supply of goods manufactured by the Applicant to third party customer qualify as exports in case the third-party customer exports such goods as it is outside India and the said goods move’ directly from the premises of the Applicant to the port of export. Some relevant paras of chapter 2, 5 and 11 of current FTP arc reproduced as under for ready reference to find out the answer to the question no. (viii) asked in the present Advance Ruling application:
2.41 Benefits for Supporting Manufacturers:
For any benefit to accrue to the supporting manufacturer (as defined in Para 11.59 of FTP), the names of both sw2mitimmanufacturer as well as the merchant exporter must figure in the concerned–export documents, especially in Tax Invoice / Shipping Bill / Bill of Export/ Airway Bill.
2.42 Third Party Exports:
Third party exports (except Deemed Export) as defined in Chapter 11 shall he allowed under FIT. In such eases, export documents such as shipping bill shall indicate name of both manufacturer exporter/manufacturer and third-party exporter(s). c-Bank Realization Certificate -(e-BRC) or export Realizations from RBI’s EDPMS wherever available in DGFT IT Systems, Export Order and Invoice should be in the name of third-party exporter.
5.04 Export obligation:
(h) For export of goods, FPCG Authorisation holder may export either directly or through third party(ies).
Definition: 11.61:
“Third-party) exports” means exports made by an exporter or manufacturer on behalf of. another’ exporter(s). In such cases, export documents .such as shipping bills shall indicate names of both manufacturer exporter/manufacturer and third party exporter(s). Bank Realisation Certificate (BRC), Self-Declaration Form (SDI:), export order and invoice should be in the name of third party exporter.
In view of the above, I find that Third-party exports are allowed under current FTP and para 2.42 (reproduced above) of current FTP substantiates this finding more specifically. Export, which arc termed as Third-party exports, are allowed by an exporter or manufacturer on behalf of another exporter(s).
15. On the basis of foregoing discussions and findings, I refrain ‘from passing a ruling on the five (05) questions i.e. from (i) to (v) (reproduced supra) asked in the subject application, which are related to duty drawback, inasmuch as, there no such jurisdiction vested in this authority as per the mandate of Chapter VB of the Customs Act, 1962. Further, my answers to question no. (vi), (vii) and (viii) (reproduced supra) asked in the present application arc as per follows:
Question (vi): Whether the Applicant can import the goods in bonded premise without payment of customs duty under Advance Authorization in accordance with Notification No. 21/2023, Customs dated April 2023 and use such goods in manufacture of exported product?
Answer: Yes, Subject to the fulfilment of the conditions stipulated in the Notification No. 21/2023- Customs dated 1st April 2023 and current Foreign Trade Policy, the Applicant can import the goods into the MOOWR unit, upon filing a bill of entry for home consumption and clearance, at the customs station of import. Such goods shall not be considered as warehoused goods in terms of section 60 of the Act.
Question (vii): Whether the Applicant can .apply for EPCG license and then de-bond the capital goods imported under the MOOWR license by utilising EPCG license for payment of customs duty payable on debonding as per Notification No. 26/2023 Customs Dated April 2023?
Answer: No, the capital goods, on which the benefits of deferral of Customs duty have already been availed/claimed under the MOOWR scheme, cannot be further de-bonded by using/utilising EPCI I license.
Question (viii): whether supply of manufactured goods by the Applicant to third party customer would be considered as a DTA Sales or Exports in case the third-party customer exports such goods as it is outside India?
Answer: Yes, Supply of manufactured goods by the Applicant to third party customer can be considered as Exports in case the third-party customer exports such goods as it is outside India and in case the goods are directly delivered to the port of Export.
16. I rule accordingly.
