Case Law Details
Commissioner of Customs Vs K.G. Denim Ltd (CESTAT Chennai)
CESTAT Chennai upheld the order directing fixation of brand rates of duty drawback for drawback of duties suffered on inputs used in exports of cotton denim fabrics as no efforts made by revenue to negate the findings of appellate authority.
Facts- The assessee was engaged in the manufacture and export of cotton denim fabrics, was availing the facilities of both brand rate of duty drawback scheme as well as DEPB scheme. Assessee filed three applications for fixation of brand rate of duty drawback for the drawback of duties suffered on inputs used in the exports made during the year 99–2000.
Thereafter, a show cause notice dated 14.03.2012 was issued by the Commissioner of Customs and Central excise, indicating therein to reject the application filed by the assessee for the reasons inter alia that they had not furnished proof of duty paid inputs declared in DBK III and IIIA statements, they had calculated the yarn consumption for a particular export based on SION which is nothing but a mere arithmetical reverse calculation and not the actual quantity of duty, paid inputs, etc.
Post reply from the assessee, the Commissioner directed for the fixation of brand rates of duty drawback. Aggrieved by the said direction, the revenue has preferred the present appeal.
Conclusion- There is no denial of the fact that the eligible brand rate is calculated based on the quantity of fabrics exported and the consumption of yarn relevant to a specific quantity of fabrics exported is arrived by reverse calculation method based on the input output norms as envisaged in the SION and the calculation so made for fixing the brand rate of due drawback appears to have been certified by the field officers, and the claim was submitted after verification to the Drawback Directorate, New Delhi. Moreover, we find that the method adopted by the receipt, respondent appears to be consistent, which fact has also not been disputed by the Revenue.
Held that there has been no effort at all made by the Revenue to negate the above findings of the Appellate Authority in any manner and hence, we are of the clear opinion that the impugned order deserves to be upheld since it is a well-reasoned order.
FULL TEXT OF THE CESTAT CHENNAI ORDER
The assessee was engaged in the manufacture and export of cotton denim fabrics, was availing the facilities of both brand rate of duty drawback scheme as well as DEPB scheme. It appears that the assessee filed three applications for fixation of brand rate of duty drawback for the drawback of duties suffered on inputs used in the exports made during the year 99–2000.
2.1 Thereafter, a show cause notice dated 14.03.2012 was issued by the Commissioner of Customs and Central excise, indicating therein to reject the application filed by the assessee for the reasons inter alia that they had not furnished proof of duty paid inputs declared in DBK III and IIIA statements, they had calculated the yarn consumption for a particular export based on SION which is nothing but a mere arithmetical reverse calculation and not the actual quantity of duty, paid inputs, etc.
2.2 Assessee appears to have filed a detailed reply dated 26.11.2013 justifying its claim. Satisfied with the reply filed by assessee and considering the requirements of the procedural Law, the Commissioner per the adjudication Order-in-Original dated 28.03.2014 directed the fixation of brand rates of duty drawback in respect of the applications filed by the assessee, by the appropriate authority. Aggrieved by the said direction, the revenue has preferred this appeal before us.
3. Heard Sri Anoop Singh, ld. Joint Commissioner for the appellant-Commissioner and Shri Rohan Muralidharan, ld. Advocate for the respondent-assessee.
4. Shri Anoop Singh contended, at the outset, that since the case involved the availing of benefit of DBK, it was for the Respondent to prove that it has fulfilled the statutory requirements. Further, the Original Authority without verifying as to whether in the earlier cases pertaining to the sample sanction orders, the same SION method was followed or not, had permitted by directing the fixation of brand rates of DBK by the appropriate authority. Moreover, the Original Authority has also not considered the requirement of law in his order. He would thus request for setting aside the impugned order.
5.1 Per contra, Sri Rohan Muralidharan submits that the applications were filed along with required statements, documents and enclosures, requesting for fixation of rate of duty DBK and hence, non-submission of inventory for manufacture of denim fabrics could not be a ground to disallow the DBK claim. Apart from this, there is no allegation as to any deficiency regarding the submission of data with the corresponding duty paid documents and therefore, the application filed by the respondent were complete in all respects. Drawing reference to Rule 2(a) of DBK Rules 1995, ld. Advocate argued that the definition therein does not prescribe that the details of actual materials used must be necessarily provided, since according to him, all India rate of drawback is calculated on the basis of FOB value of the goods and not on the basis of actual inputs used. There is also no mandatory stipulation even in Rule 6 ibid insofar as the actual inputs used are concerned. Therefore, the insistence on the production of details pertaining to actual inputs is baseless.
5.2 He would also argue that it is practically not possible to arrive at the exact consumption of inputs used in the manufacture of export products since quantity of a few goods may be rejected in quality test and their raw material used which is yarn is measured in kilograms while the fabrics manufactured out of such young or measured in metres. Moreover, the Standard Input Output Norm [SION] is a standard norm which defines the number of inputs required to manufacture, and while fixing the SION for any export products, all technical details would be considered by the respective authority, namely DGFT, which details had been submitted along with their brand rate applications.
6. After hearing both sides, we find that the only issue to be decided by us is, “whether the direction of the Original Authority in directing the fixation of brand rates of drawback is in order?”
7.1 We have carefully considered the rival contentions and also perused the documents placed on record by both the parties. The primary contention of the Revenue is that it is a statutory requirement that the quantum of inputs which have actually gone into the manufacture has to be determined for ascertaining the DBK amount; the assessee- respondent instead of producing any such documentary evidence, has only furnished an arithmetical calculation going by the SION, which would only give an approximate weight.
7.2 In the impugned order, we find that the Original Authority has recorded at para 15.01 that the applications filed by the respondent included all the necessary documents and enclosures; DBK-I statement which is crucial as it determines the gross quantity of inputs required for the production of export goods which is enclosed, it was noticed that column 7 mentions about the gross quantity required. At para 15.02, the Original Authority records that from the working produced at the end of para 15.01, the gross quantity required was not on actual basis but has been calculated by reckoning the net weight of the exported fabrics as per SION norms. Drawback which is rebate of duty paid on excisable goods used in the manufacturer of export fabrics, term “used” refers to the actual quantity of goods used in the manufacture. The justification for this method adopted by the respondent has also been reproduced at para 15.03 and thereafter, the Original Authority observes that there was sufficient force in the contentions of the assessee since the exporter cannot manufacture exact quantity of fabric required for export under a particular consignment and that the export items are always subject to rigorous quality test and inspection.
7.3 We find that the incidence of duty suffered at the input stage, in the absence of Modvat/deemed credit benefits should be rebated by way of drawback; when the exact quantity of yarn consumed out of the purchased quantity could not be ascertained under circumstances, like the one in the case on hand, there has to be a methodology to be adopted, it could be SION norms or any other input output norms as available in textile parlance. SION being an established norms prescribed even by DGFT for the purpose of export – import commerce which is recognized in law, there is no infirmity in applying the same norms in the case on hand. Further, there is a finding in the impugned order that the drawback eligibility is calculated after accounting for the duty involved on the production wastage at 4% and finally the eligible amount of drawback is arrived at against the FOB value and therefore there was no infirmity in adopting the SION norms for the reasons that the main purpose underlying the drawback scheme is rebate of duty paid on excisable goods used in the exported products. We do not find any counter based on record to the above findings in the order and nor do we find any assertion by the revenue as to either the non-usage of materials in the manufacture of Denim and the non-export of its manufactured products.
7.4 There is no denial of the fact that the eligible brand rate is calculated based on the quantity of fabrics exported and the consumption of yarn relevant to a specific quantity of fabrics exported is arrived by reverse calculation method based on the input output norms as envisaged in the SION and the calculation so made for fixing the brand rate of due drawback appears to have been certified by the field officers, and the claim was submitted after verification to the Drawback Directorate, New Delhi, as appearing in paragraph 15.10 of the impure order. Moreover, we find that the method adopted by the receipt, respondent appears to be consistent, which fact has also not been disputed by the Revenue, which has also been extracted in detail in para 16.02.
7.5 Insofar as the allegation of reverse calculation alleged by the Revenue, we find that the input output ratio is prescribed by the SION, which is also recognized under law and hence the mode of calculation adopted by the respondent cannot be rejected. It is not the case as though said method was adopted deliberately, rather the respondent has explained the circumstances which prompted them to adopt the said method not only for the year under consideration but also for the earlier years, which has been accepted by the revenue. This apart, there is no allegation by the revenue that there was any statutory violation by the respondent, other than following the SION norms. There is also an interesting observation by the adjudicating Authority at paragraph 17.03. Where in, it is observed as under:
‘….. in this case they verification reports were earlier submitted to Director, Drawback, New Delhi in 2001. Again, after the claims were received back from Coimbatore Commissionerate in 2010 at this office, the Jurisdictional Assistant Commissioner had submitted verification reports in the year 2011. The contents of the above reports have not been disputed in the SCN. Moreover, the divisional report had not pointed out any discrepancy with regard to consumption of inputs and non- maintenance of inventory, as raised in the SCN……… ’
7.6 We find that there has been no effort at all made by the Revenue to negate the above findings of the Appellate Authority in any manner and hence, we are of the clear opinion that the impugned order deserves to be upheld since it is a well-reasoned order.
8. Viewed thus, we do not find any infirmity in the impugned order of the Commissioner and hence, we do not find any merit in the appeal. Resultantly, we dismiss the appeal.
(Order pronounced in the open court on 08.11.2024)
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