ARVIVA INDUSTRIES I LTD Vs. UNION OF INDIA

JUDGEMENT

(1.) : The petitioner has approached this Court by challenging the Circular No. 39/2001 dated 6th July, 2001 to the extent it affects the rights of the petitioner prejudicially by making it operative retrospectively and the orders at Exhibits A-1 to A-7 whereby the petitioner's brand rate applications have been rejected. 2. The petitioner is engaged in the manufacture/export of Dyed Polyester viscos suiting fabrics (for short, "the processed fabrics" ). In the Export and import policy for the period 1997-2002 Duty Entitlement Pass Book Scheme (DEPB Scheme) was introduced. The objective of DEPB Scheme was to neutralise the incidence of basic customs duty and surcharge thereof on the import content of export product. The neutralisation was to be provided by way of grant of duty credit against the export product. The duty credit under the DEPB Scheme was to be calculated by taking into account the deemed import content of the said export product as per the Standard Inputs/output norms (SION) and determine basic custom duty and surcharge thereof payable on such deemed imports. It also provided that the value addition achieved by export of such product should be taken into account while determining the rate of duty credit under the Scheme. The DEPB Scheme clarified that the exports made thereunder shall not be entitled for drawback. It appears that the Central Board of Excise and Customs (for short, "the Board") vide its circular No. 68/97 dated 2-12-1997 extended brand rate of drawback scheme under DEPB Scheme. It was done so because the exporters made representations to the effect that wherever fiber goods exported by them were not liable to central excise duty, the exporters were unable to avail of MODVAT credit of additional customs duty (CVD) paid in cash on imported inputs, or excise duty paid on indigenous inputs, utilised in the production of export goods and that the duties suffered by them were not fully compensated to them at the time of export. Acting on these representations of the exporters, the Board decided that the exports made under the DEPB Scheme of those products which cannot avail Modvat Credit on additional duty of customs (CVD) paid in cash on imported inputs or excise duty paid on indigenous inputs as no excise duty was payable on the export goods, would be entitled for payment of brand rate of drawback. The brand rate of drawback was to be fixed by the Director of Drawback against additional customs duty/ excise duty suffered on inputs, on submission of proof of payment of duty by the exporters. The Board thereafter by Circular No. 39/99 dated 25-6-1999 issued the following circular: "circular No. 39/99-Cus. , dated 25-6-1999 (From F. No. 605/145/97-DBK)Government of India Ministry of Finance (Department of Revenue) New Delhi. Subject: Extension of Brand Rate of Drawback Scheme to exports under depb Scheme - Reimbursement of Additional Customs Duty (CVD)paid in cash on imported inputs and Excise duty paid on indigenous inputs in export goods - Regarding. Various representations have been received from Trade/exporters that wherever final goods exported by them are liable to compounded levy of central Excise duty, in such cases, the exporters are unable to avail of modvat Credit of additional customs duty (CVD) paid in cash on imported inputs, or excise duty paid on indigenous inputs, utilised in the production of export goods; and thus the duties suffered by them are not fully compensated to them the time of export. Such situation presently pertains to steel re-rolling industry (Notification No. 33/97-C. E. , dated 1-8-1997 refers) and processed fabrics (Notification No. 36/98-C. E. , dated 10-12-1998 and 44/98-C. E. (N. T.), dated 10-12-1998 refer ).

(2.) IN view of the above, the issue has been examined in the Board and it has been decided that the exports made under DEPB Scheme of those products which cannot avail Modvat Credit of the additional duty of customs (CVD) paid in cash on imported inputs, or excise duty paid on indigenous inputs, will be eligible for payment of brand rate of Drawback to be fixed by the Directorate of drawback against additional customs duty/excise duty suffered on inputs on submission of proof of payment of duty. This will be applicable to exports of re-rolled steel products which are covered under Notification No. 33/97 C. E. , dated 1-8-1997 and processed fabrics, which are covered by Notification No. 44/98-C. E. (N. T.), dated 10-12-1998.

(3.) IT is not in dispute before us that in so far as the petitioner was concerned, it was not eligible for payment of brand rate of drawback under the circular No. 68/1997 as it was able to avail Modvat Credit. Vide Circular No. 68/97 the condition precedent for eligibility for payment of brand rate of drawback was non-availability of Modvat Credit and since the petitioner was availing of Modvat Credit it was not eligible for payment of brand rate of drawback. With effect from 16th December, 1998, the petitioner was unable to avail of Modvat Credit in view of the notifications issued by the Ministry of finance, Government of India. For the subject exports for the period from september, 1999 to January, 2001, it is petitioner's case that as it did not avail Modvat Credit, it was eligible for payment of brand rate on drawback vide Circular No. 39/1999 and in fact for some of the shipping bills the petitioner did receive payment of brand rate of drawback fixed by the Directorate of drawback against excise duty suffered on inputs. The Board, however, subsequently on 6th July, 2001 issued Circular No. 39/2001. Since the said circular is under challenge to the extent stated above, we deem it fit to reproduce the said circular. It reads thus: "circular No. 39/2001 Cus. , dated 6-7-2001 (From F. No. 605/35/2001-DBK)Government of India Ministry of Finance (Department of Revenue Central board of Excise and Customs, New Delhi. Subject: Extention of Brand Rate of drawback scheme to exports under DEPB scheme against DEPB cum drawback shipping bills- Regarding. Attention is invited to Board's Circular Nos. 68/97-Cus. , dated 2-12-1997 and 39/99-Cus. , dated 25-6-1999 (1999 (111) E. L. T. T-33) both issued from F. No. 605/ 145/97/-DBK in terms of which facility of brand rate of Duty drawback scheme was extended to exports made under DEPB scheme against DEPB cum drawback shipping bills subject to condtions specified in the said two circulars. 2. Certain doubts have arisen in regard to the types of cases whereunder the facility of both DEPB as well as Brand Rate of drawback will be admissible. It has been observed that Exim Policy provisions are very clear and indicate that exports made under DEPB scheme shall not be entitled for drawback. However, the additional customs duty paid in cash on inputs under DEPB can be claimed for adjustment/relief by way of modvat Credit or duty drawback as per Rules of DOR. Under duty exemption schemes, facility of drawback for duties paid if any was extended only for inputs not covered by SION or inputs not permitted under advance licences to avoid unintended benefit. It is accordingly clarified that facility of brand rate of drawback for export made under depb scheme against DEPB-cum-drawback shipping bills shall be allowed only in the following situations; (a) where the additional duty of customs has been paid in cash on inputs imported under DEPB scheme used in export products and no MODVAT (CENVAT) has been availed for such additional duty paid; and (b) where excise duty is paid on indigenous inputs not specified in relevant sion, but used in export product and no MODVAT (CENVAT) has been availed for such excise duty paid. 3. Brand rate of drawback in such cases shall be considered irrespective of whether the export product is dutiable/excisable or not. 4. Circular Nos. 68/97-Cus. , dated 2-12-1997 and 39/99-Cus. , dated 25-6-1999 shall stand corrected to the extent mentioned above in the preceding paragraphs and other conditions of the said two circulars shall continue to apply. 5. All pending brand rate applications for exports made under DEPB Scheme against DEPB-cum-drawback shipping bills may be processed/disposed of accordingly. 6. Decisions in respect of past exports made against DEPB-cum-drawback shipping bills, where brand rate of drawback has already been granted, shall be examined separately and suitable instructions shall follow. 7. Suitable instructions/standing order may be issued for the guidance of trade/field staff. "