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3. The   department   challenged   the   order   of   Commissioner  (Appeals)   before   the   Government   by   filing   the   revision  petition.   The   revision   petition   was   allowed   by   impugned  order   dated   9.10.2014.   Reference   was   made   to   the  notification   no.97/2009   dated   11.9.2009   which   provided  that an importer shall be entitled to avail the drawback or  CENVAT credit of additional duty leviable under section 3  of the Customs Tariff Act against the amount debited in the  DEPB scrip. This clarification was interpreted as to limiting  the   benefit   of   drawback   only   on   additional   duty   leviable  under section 3 of the Customs Tariff Act and not to cover  the drawback on basic customs duty when debited in the  DEPB.   This   order   the   petitioner   has   challenged   in   this  petition.

5. In   the   background   of   such   facts,   learned   advocates  appearing for the petitioners contended that the approach  of the Government  of India is wholly erroneous. The duty  drawback is provided where customs paid inputs are used  for   export   of   final   product   and   is   governed   by   statutory  provisions   and   regulations   made   by   the   Government   of  India.  There  is no limitation  on drawback  being  available  when   the   customs  duty  is  suffered  through  surrendering  credit in the scheme, be it DPEB or MLFPS. In either case,  it cannot be stated that the customs duty is not paid. Our  attention was drawn to rule 3 of the Rules of 1995 which  provides for benefits of the drawback, subject to conditions  laid  down  therein,    at specified  rates.  It was  argued  that  HC-NIC Page 5 of 18 Created On Sat Jun 11 00:26:21 IST 2016 C/SCA/8025/2015 JUDGMENT there is no restriction on availability of drawback when the  duty is paid through debit in DEPB scrip. The reliance of  the   authorities   on   the   clarification   about   availability   of  drawback on additional customs duty paid through  DEPB,  cannot  be   utilised  to   deny  the  benefit  of  drawback  when  the question of basic customs duty arises. 

6. On the other hand, learned counsel Shri Ravani and Shri  Bhatt for the department opposed the petitions contending  that   the   claim   of   drawback   of   an   exporter   must   be  examined within the statutory provisions and Government  of India notifications and the policy,   which do not permit  drawback on imports made under  DEPB and other similar  export  incentive schemes.  In case of imports made under  DEPB   scheme,   the   customs   duty   is   exempted.   Goods  therefore,   not   having   suffered   the   customs   duty,   upon  export   of   the   final   product,   drawback   would   not   be  available.   Our   attention   was   drawn   to   the   decision   of  Division   Bench   of   this   Court   in   case   of  Gujarat   Ambuja  Exports   Ltd.   v.   Government   of   India  reported   in   2013  (289)   ELT   273   (Guj),     in   which   in   the   context   of  chargeability  of  education  cess,  this  Court  had  examined  the  provisions  contained  in   DEPB  scheme.  Reliance  was  also  placed  on  the  Government  of  India  circular  no.3/99  dated 3.2.1999 in which it was clarified that brand rate of  drawback   is   admissible   only   against   cash   payment   of  duties and debit of duties under  DEPB scheme on import  of goods being in the nature of availment of exemption of  duty   under   the   Customs   Act,   drawback   would   not   be  available. 

"Applicability of Drawback.
Additional   customs   duty/Excise   Duty   and   Special  Additional Duty paid in cash or through debit under DEPB  may also be adjusted as CENVAT Credit or Duty Drawback  as per DOR rules."

16. It can thus be seen that the   DEPB scheme aims at  neutralising   the   incidence   of   customs   duty   on   import  component   of   export   product,   where   upon   export,   credit  would be   given at specified rate on the FOB value of the  exports.  Such credit could be utilised for payment of duty  HC-NIC Page 14 of 18 Created On Sat Jun 11 00:26:21 IST 2016 C/SCA/8025/2015 JUDGMENT in future or may even be traded.  It was in this background  that   Supreme   Court   in   case   of    Liberty   India   v.  Commissioner   of   Income­tax  reported   in  317   ITR   218,  had held  that DEPB being  an incentive  which  flows  from  the   scheme   framed   by   the   Central   Government,   hence,  incentives   profits   are   not   profit   derived   from   the   eligible  business (in the said case falling under section 80­IB of the  Income   Tax   Act)   and   belong   to   the   category   of   ancillary  profits of the undertaking. Such incentive in the nature of  DEPB  benefit  from  the  angle  of the  income  tax  has  been  seen as income of the undertaking. Thus when an importer  whether   imports   goods   under   DEPB   scheme   or   pays  customs duty on the imports on purchased DEPB credits,  he   essentially   pays   customs   duty   by   adjustment   of   the  credit in the pass­book. It would therefore, be incorrect to  state   that   the   imports   made   in   such   fashion   have   not  suffered the customs duty.