A manufacturer/ exporter is not barred from seeking determination of Brand Rate of drawback merely because he had applied for and granted drawback as per the All Industry Rate of drawback
Alfa Laval (India) Ltd. Vs. The Union of India & Others [(2014) 9 TMI 145- Bombay High Court]
In the instant case, Alfa Laval (India) Ltd. (the Petitioner) is engaged in manufacturing and export of dutiable excisable goods. The Petitioner imports various inputs on payment of Customs duties and also procures inputs from indigenous sources on payment of applicable duties. The finished goods are either cleared in the domestic market or exported out of India. The exports out of India are made under claim for duty drawback available under Section 75 of the Customs Act, 1962 (the Customs Act) read with the Customs, Central Excise Duties and Service Tax Drawback Rules, 1995 (the Drawback Rules). At the time of export of the finished goods, the Petitioner files the shipping bill under claim of drawback which is claimed in terms of Rule 3 of the Drawback Rules. Thereafter, within the time specified in Rule 7 of the Drawback Rules, the Petitioner makes an application for determination of drawback under Rule 7. This had been a long term practice of the Petitioner.
However, during May 2011 and 2012, the Department rejected the applications filed by the Petitioner under Rule 7 of the Drawback Rules on the ground that the Petitioner had already claimed drawback at the All Industry Rate under Rule 3 and hence the Petitioner was not entitled to make applications under Rule 7 seeking determination of the Brand Rate of drawback for the very same exports. The Department relied on the Circular F. No. 606/04/2011-DBK dated December 30, 2011 (the Circular).
The Petitioner filed a writ petition before the Hon’ble Bombay High Court seeking quashing of the Circular to the extent that it purports to clarify that an exporter cannot claim the Brand Rate of drawback under Rule 7 of the Drawback Rules after having availed of the All Industry Rate of drawback under Rule 3.
The Hon’ble High Court observed that there is no prohibition in the Drawback Rules which debars an exporter from seeking determination of the Brand Rate of drawback under Rule 7, merely because at the time of export, he had already claimed the All Industry Rate of drawback under Rule 3. Further, it was observed that application of determination of Brand Rate of Drawback under Rule 7 can be made only when the amount or rate of drawback determined under Rule 3 is less than 4/5th of the duties or taxes paid on the inputs/input services used in the production or manufacture of the exported goods.
Therefore, it was imperative that application under Rule 3 has to be made before application under Rule 7.
Furthermore, the Hon’ble High Court held that the Circular cannot override the Drawback Rules and para (d) of the Circular which seeks to impose restriction of filing of Drawback application under Rule 3 and 7 of the Drawback Rules has to be struck down.
Accordingly, it was held that the manufacturer or exporter is not barred from seeking a determination of the Brand Rate of drawback under Rule 7 merely because, at the time of export, the Petitioner had applied for and granted drawback at All Industry Rate as determined under Rule 3.
(Bimal Jain, FCA, FCS, LLB, B.Com (Hons), Mobile: +91 9810604563, Email: firstname.lastname@example.org)