Combitic Global Caplet Pvt. Ltd Vs Union of India (Delhi High Court)
Conclusion: Assessee as an EOU was entitled to claim deemed export drawback on raw materials/inputs which remained unutilized with the then-existing DTA unit at the time of its conversion into a 100% EOU.
Held: In the instant case, after the conversion to 100% EOU unit had taken place, assessee claimed duty drawback qua custom duty component, on the premise that deemed export had taken place. An application was filed on 08.04.2013 by assessee claiming the duty drawback benefit for the period ending in September 2012, amounting to Rs.38,35,686/-. Assistant DC, however, had a different view and consequently, via order dated 10.05.2013 rejected assessee’s claim. The principal reason given by Assistant DC was that the claim for duty drawback (as a measure of deemed export benefit) could not be entertained, as the goods against which duty drawback was claimed, had been received in the unit, prior to it being declared an EOU. It was held that the outstanding export commitment under the advance authorization scheme qua the existing DTA unit was carried forward and fulfilled by the converted unit i.e., 100% EOU. Assessee had taken a definitive stand that under the Advance Authorization Scheme, at the time of conversion, out of 500kg of sulpiride powder imported, 206.520kg had been consumed and thus, the balance quantity i.e., 293.480 kg was transferred/supplied to its converted unit i.e., 100% EOU in terms of Appendix 14-I-O of the FTP. Besides this, assessee submitted that the Government of India had even allowed the transfer of the outstanding export commitment under the Advance Authorization Scheme, at the time of conversion of the existing DTA into 100% EOU. Having regard to the language oof HBP, assessee was right, that the restriction against the claim of concession in duties and taxes applied only vis-à-vis plant, machinery and equipment that had already been installed. Thus, the fact that assessee was allowed to carry forward the advance authorization to the converted unit i.e., 100% EOU and thereafter fulfil the outstanding export commitment would furnish a clue that duty drawback for such goods should extend qua unutilized goods, which were available at the time of conversion of the DTA unit into a 100% EOU.
FULL TEXT OF THE JUDGMENT/ORDER OF DELHI HIGH COURT
1. This writ petition seeks to challenge Policy Circular No.9(RE-2013)/2009-14 dated 30.10.2013 [hereafter referred to as “2013 Circular”] and orders dated 26.04.2016 and 17.11.2016, passed by the Deputy Development Commissioner („Deputy DC’) and the Deputy Director General of Foreign Trade („Deputy DGFT’), respectively.
2. The central issue which arises for consideration is: whether the petitioner is entitled to duty drawback, confined to customs duty component, against deemed exports, even where it has claimed cenvat credit.
2.1. The concomitant issue which is required to be addressed is: whether the petitioner should be allowed to claim duty drawback on the customs duty component based on All Industry Rates („AIR’), without having to furnish evidence concerning actual duty suffered on imported or indigenous inputs used in the manufacture o goods.
3. Before proceeding further, it would be useful to set out the broad backdrop in which the instant writ petition has been instituted in this Court.
Background:
4. The petitioner is a manufacturer and exporter of pharmaceutical products. The petitioner claims that it has been in this business for over 15 years and has resultantly gained the status of a two-star export house. The petitioner also avers, an aspect which is not disputed, that it converted its Domestic Tariff Area („DTA’) unit into a 100% Export Oriented Unit („EOU’) w.e.f. 28.09.2012.
4.1. The conversion of the DTA Unit into 100% EOU, according to the petitioner, has been physically verified and certified by the jurisdictional central excise authority.
5. After the conversion to 100% EOU unit had taken place, the petitioner claimed duty drawback qua custom duty component, on the premise that deemed export had taken place.
5.1. An application, in this behalf, was filed on 08.04.2013. Via this application, the petitioner claimed the duty drawback benefit for the period ending in September 2012, amounting to Rs.38,35,686/-.
5.2. The Assistant DC, however, had a different view and consequently, via order dated 10.05.2013 rejected the petitioner’s claim. The principal reason given by the Assistant DC was that the claim for duty drawback (as a measure of deemed export benefit) could not be entertained, as the goods against which duty drawback was claimed, had been received in the unit, prior to it being declared an EOU.
5.3. The petitioner, it appears, revised the claim via a fresh application dated 17.06.2013.
5.4. The office of the Deputy DC, via order dated 08.08.2013 declined to consider the petitioner’s claim.
5.4.(a) The analogy drawn in the communication dated 08.08.2013 was that where duty paid by EOUs is ab initio exempted from payment of duty, the refund of terminal excise duty („TED’) is not granted.
5.4.(b) The petitioner attempted to persuade the office of the Deputy DC, via a return response dated 09.09.2013. According to the petitioner, it did not receive any response to the same, despite having served a reminder on the said office on 07.12.2013.
6. The aforementioned application and the order passed, including the communication that was exchanged by the petitioner with the office of the Deputy DC, concerned the claim of duty drawback on goods, which were received prior to the DTA unit being converted into 100% EOU.
7. The petitioner‟s experience was that even after the conversion had taken place i.e., 28.09.2012, applications filed to claim duty drawback, concerning customs duty component were rejected.
7.1. For the sake of convenience, the claims made by the petitioner for various periods from time to time, along with details regarding the order by which the said claims were rejected or kept in abeyance are set forth hereafter:
