Custom, Excise & Service Tax Tribunal
M/S. Virchow Laboratories Ltd vs The Commissioner Of C, Ce & St, ... on 17 November, 2016
CUSTOMS, EXCISE AND SERVICE TAX APPELLATE TRIBUNAL
REGIONAL BENCH AT HYDERABAD
Bench SMB
Court I
Appeal No. E/21176 & 21177/2014
(Arising out of Order-in-Appeal No. 81 to 88/2013 (H-IV) CE dt. 30.09.2013, No. 130/2013 (H-IV) CE dt. 30.12.2013 passed by CC, CE & ST (Appeals-II), Hyderabad)
For approval and signature:
Honble Ms. Sulekha Beevi, C.S., Member(Judicial)
1.
Whether Press Reporters may be allowed to see the Order for publication as per Rule 27 of the CESTAT (Procedure) Rules, 1982?
2.
Whether it should be released under Rule 27 of the CESTAT (Procedure) Rules, 1982 for publication in any authoritative report or not?
3.
Whether their Lordship wish to see the fair copy of the Order?
4.
Whether Order is to be circulated to the Departmental authorities?
M/s. Virchow Laboratories Ltd.,
..Appellant(s)
Vs.
The Commissioner of C, CE & ST, Hyderabad-iv
..Respondent(s)
Appearance Shri. M.Rajendran, Advocate for the Appellant.
Shri. Arun Kumar, Deputy Commissioner (AR) for the Respondent.
Coram:
Honble Ms. Sulekha Beevi, C.S., Member (Judicial) Date of hearing: 31/10/2016 Date of decision: FINAL ORDER No._______________________ [Order per: Sulekha Beevi, C.S.] The brief facts of the case are that the appellant was engaged in manufacture and export of Bulk Drugs. They exported final products to M/s. Aurobindo Pharma Ltd., in SEZ, under claim for duty drawback. They filed claims of customs duty draw back in respect of the export consignments. The duty draw back claims were rejected by the adjudicating authority against which the appellant filed appeals before the Commissioner (Appeals). The Commissioner (Appeals) rejected the drawback claims on the ground that the appellant has failed to establish that the goods imported under advance licenses were not utilised on manufacture of exported goods on which duty drawback is claimed. Hence this appeal.
2. The adjudicating authority has rejected refund claims on various grounds. The Commissioner (Appeals), however, has observed that there is no need to go in depth on other grounds on which the lower authority rejected the drawback claim as the appellant has failed to establish that goods imported under Advance License are not used in manufacture of export goods itself ample ground to reject the refund. Thus as per the impugned orders, in both the appeals the ground for rejection of drawback claim is that the appellant has not been able to establish that the goods imported under Advance Licenses were not utilized for manufacture of goods which were exported and on which drawback is claimed.
3. On behalf of the appellant, the Ld. Counsel Shri. M. Rajendran submitted that the appellant had procured inputs by three different manner. The appellant is using about 27 inputs and out of this, 5 inputs were procured in three different manner i.e., by import under Advance License, by import on payment of duty and by purchase from domestic market by paying duty. The case of the department is that having imported inputs by using advance license which are duty free imports, the drawback claim cannot be allowed. That unless the appellant establishes that the inputs imported by Advance License is not used in the manufacture of goods exported of which drawback claim is filed, the drawback cannot be allowed. He submitted that sub-clause (ii) of Sub section (2) of proviso to Rule 3 of the Drawback Rules, 1995 does not lay down any such condition.
4. That another ground by which original authority rejected the drawback claim is that the claim is time barred. He adverted to Rule 13 of the Drawback Rules 1995 and submitted that the triplicate copy of the shipping bill shall be deemed to be a claim for drawback and therefore the drawback claims are within time. The Ld. Counsel submitted that whatever goods were manufactured using Advance License were exported out of India and that the appellant had fulfilled the export obligation. That therefore it is clear that appellant has not used the inputs imported by Advance License to manufacture goods cleared to SEZ on which drawback claim is made. He emphasized on the point that the Department has failed to take note of the fact that appellant has fulfilled the export obligation which is one of the major condition, while using the Advance License.
5. The Ld. AR Shri. Arun Kumar appearing for the Department submitted that the appellant has imported inputs using Advance License. This means appellant has procured duty free inputs by using Advance License. The sub-clause (ii) to the second proviso to Rule 3, of Draw Back Rules, 1995 states that drawback claim cannot be allowed, if the goods are manufactured using materials imported duty free. Therefore the rejection of drawback claim is legal and proper.
6. I have heard both sides. One of the grounds for rejection of drawback claim by original authority is that it is time barred. The first appellate authority did not go into this issue. Rule 13 of Draw Back Rules, 1995 clearly specifies the time and manner for claiming drawback. It provides that the triplicate copy of the Shipping Bill shall be deemed to be a claim for drawback. The relevant provision in Rule 13 is noticed as under:
Rule 13: Manner and time for claiming drawback on goods exported other than by post:
1. Triplicate copy of the Shipping Bill for export of goods under a claim for drawback shall be deemed to be a claim for drawback filed on the date on which the proper officer of Customs makes an order permitting clearance and loading of goods for exportation under section 51 and said claim for drawback shall be retained by the proper officer making such order.
6. According to the appellant, as per the above provision, the claim is deemed to have been filed on the date, the proper officer of Customs made an order permitting clearance and export of goods into SEZ. That the proper officer of SEZ asked the appellants to file the drawback through jurisdictional Central Excise officer as there was an administrative Circular in this regard (Board Circular No. 43/2007-Cus dated 15.12.2007). The appellant along with a letter, then presented the claim to the concerned Central Excise officer. As per the endorsement of SEZ office, the goods were received into SEZ on 21.10.2011. The claim was presented to Central Excise officer on 03.01.2013. The original authority has therefore put forward the ground of time bar. Computing from the date of presenting the drawback claim to the Central Excise officer. Rule 13 makes it clear that manual application for drawback is not necessary. It is also expressly provided that triplicate copy of Shipping Bill is deemed to be a drawback claim. This facilitates EDI system of drawback claim. He therefore argued that the claim is made within time. I do find force in the argument put forward by the Ld. Counsel as Rule 13 of Draw Back Rules clearly states that the triplicate copy of the shipping bill roting the claim for drawback is deemed to be a claim for drawback filed on the date the proper officer makes order for clearance of goods. This being so the claim is held to be made within time.
7. Another ground raised by adjudicating authority for rejecting drawback is that no evidence has been adduced to show that payment is received from Foreign Currency Account of the SEZ unit. In this regard the Ld. Counsel has pointed out that, the Shipping Bill will show the undertaking given by SEZ unit to pay from their Foreign Currency Account which is stamped therein. The adjudicating authority has refused to accept this undertaking and has called for further document, which in my view is unjustified. The department, the SEZ Officer could very well verify whether the undertaking given by SEZ unit is false or not. Having no case that the amount is not paid from the Foreign Currency Account of SEZ unit, the rejection of drawback claim on this ground by adjudicating authority is not proper.
8. The third ground for rejection which is upheld by the Commissioner (Appeal) and the only ground in the impugned orders for rejection of drawback claim is that the appellant has used duty free inputs imported by Advance License in the manufacture of goods which have been exported to SEZ unit and therefore draw back cannot be allowed.
9. On behalf of the appellant, it is submitted that the goods exported are manufactured using 27 different inputs and out of this only 5 inputs were imported by the appellant. That these five inputs were procured in three different manner. By import under Advance License, by import on payment of duty and by purchase on payment of duty. That the export goods are not wholly manufactured from duty free inputs and therefore 2nd proviso to Rule 3(1) is not attracted. He submitted that only small percentage of 5 inputs were imported without duty under Advance License. That it is difficult to identify a particular input imported under Advance License which is used for manufacture. It is the contention of appellant that the export obligations against import under the Advance License having been fulfilled, the drawback claim cannot be rejected on this ground.
10. Duty drawback is a relief by way of refund of customs/excise duties paid on inputs or raw materials and service tax paid on input services used in the manufacture of export goods. The second proviso to Rule 3 of Drawback Rules, 1995 reads as below:
Provided further that no drawback shall be allowed.
ii) if the said goods are produced or manufactured, using imported materials or excisable materials or taxable services in respect of which duties or taxes have not been paid. The above provision states that the exporter cannot claim drawback if duties have not been paid on the inputs, input services. The intention of the said Rule is not to allow drawback on inputs obtained without payment of customs or excise duty. The contention put forward by appellant is that out of the 27 inputs only 5 were imported. The remaining 22 inputs suffered duty. That being a processing industry, the input gets mixed up and it is very difficult to identify a particular input imported under Advance License and used for manufacture and the quantity of inputs imported by Advance License used in manufacture being very less the drawback may allowed. I am not able to agree with this contention of appellant. When the Rule itself, does not permit drawback in case of inputs on which duty has not been paid, the appellant ought to have maintained some procedure/ segregation / accounting method for the inputs used in manufacture of products exported, if the appellant intended to claim drawback. The rejection of drawback claim on this ground holds merit.
11. In view thereof, I do not find any ground to interfere with the impugned order. The appeals are dismissed.
(Pronounced in open court on) SULEKHA BEEVI C.S. MEMBER (JUDICIAL) Lakshmi 8