Prohibition and regulation of drawback [Section 76] :
(a) Notwithstanding anything herein before contained, no drawback shall be allowed
(i) in respect of any goods, the market price of which is less than the amount of drawback due thereon,
(ii) where the amount of drawback in respect of any goods is less than fifty rupees.
(b) Without prejudice to the provision of sub- section (I) if the Central Government is of the opinion that goods of any specified description in respect of which drawback is claimed under this chapter are likely to be smuggled back into India, it may by notification in the Official Gazette, direct that drawback shall no be allowed in respect of such goods or may be allowed subject to such restrictions and conditions as may be specified in the notification.
In case of Sarala Enterprises v. CC 2001 (128) ELT 113 (CEGAT), it was held that if the market price of goods which is less than the amount of drawback due thereon, the claim can be rejected and penalty can be imposed.
The market price is as prevailing in India and not the price which exporter expects to receive from the foreign customer [Om prakash Bhatia v. CC 2003 ELT 423 (SC)].
RELEVANT CASE LAWS
In order to appreciate the importance of the basic principles underlying the law relating to grant of drawback, we have discussed below two important cases:
1. ABC India v. Union of India 1992 (61) E.L.T. 205 (Del.) [maintained by Supreme Court]
There is distinction between section 74 and 75 of the Customs Act – section 74 of the Customs Act comes into operation when articles are imported and therupon exported, such articles being easily identifiable; and section 75 comes into operation when imported materials are used in the manufacture of goods which are exported.
Facts: The Government of Andhra Pradesh floated an international tender for the transportation of Monolithic Buddha statue. The statue was required to be transported from Raigir, Nalgonda District, where the statue was rough – dressed and trasported to the foreshore of Hussain Sagar Lake, Hyderabad, where it was to be installed. The transportation of this Monolithic statue was a highly technical work and a special equipment for transportation as well as special lifting and erection equipment called Hydra – jack was required. This Hydra – jack was imported from a firm in Holland on hire. The equipment was imported on a customs clearance permit on an undertaking to export the equipment within a specified period. However, the job of installation of statue in the rock at the centre of the lake could not be completed as during transportation of the statue from the shore to the central rock, the statue sank in the lake. The Hydra – jack was therefore shipped back to the suppliers from whom it was hired. A claim for drawback under section 74 of Customs Act was made claiming drawback of 98% of the total duty paid in respect of the goods. The Assistant Commissioner, however allowed drawback only at the rate of 85% of the total import duty paid.
Issue: The question that needed to be determined is whether the drawback is to be granted at 98% or 85% as has been allowed by the department.
| Decision: The Delhi High Court held that the reduction in the rate of drawback was applicable in case where the goods had been used after importation and this reduction was sanctified in accordance with a notification issued under section 74 prescribing the rates of drawback admissible in case of goods used in India before their re- export.
In deciding the matter, the Court took a clear view that whether the jack in question was used or not is a question of fact. Since the statue did not reach the central rock (Gibraltar) where the statue had to be hoisted for installation, it is clear that the Hydra – jack could not be used in India. |
The Court held that in these circumstances, the drawback was admissible under section 74.
2. Commissioner of Customs v. India Steel Industries 1993 (67) E.L.T. 760 (G.O.I.)
Rule of interpretation in tariff need not be extended to interpretation of classification under the Drawback Rules.
Facts: In the schedule II to Customs and Central Excise Drawback Rules, two entries occurred namely:
| 3606 | All type of bright steel bars and shaftings | ` 395/- PMT |
| 3803 | Articles made of stainless steel including stainless steel castings, not otherwise specified, made of austenitic variety of stainless steel | ` 890/- PMT |
The issue was whether the words “all types” occurring in the entry against 3606 referred to “steel bars” alone or qualified the next nomenclature “shaftings”. In the Customs Tariff, a clear distinction is made between bars and shaftings. The department argued that in the commercial parlance bars were not known to be made up of stainless steel and shaftings did not come under the same category as bars. It was therefore, argued by the department that shafting would appropriately fall under the description articles made of stainless steel including stainless steel castings.
| Decision: The Government of India held that the words “all types” did not refer to dimensional distinction alone but referred to the nature of the material used such as mild steel, carbon austenitic steel etc. It was further held that the rules of the interpretation of a tariff would not apply to rules of interpretation of the entries to the Schedule II to drawback, but they would have persuasive value. It was further held when two different descriptions or words are used, it would be necessary to give them the natural and separate meaning to make them meaningful. |