Alfa Laval (India) Ltd. Versus Union of India>2014(09)LCX0008

2014(09)LCX0008

IN THE HIGH COURT OF JUDICATURE AT BOMBAY

S.C. Dharmadhikari and B.P. Colabawalla, JJ.

Alfa Laval (India) Ltd.

Versus

Union of India

Writ Petition No. 1098 of 2013, decided on 1-9-2014

Cases Quoted -

Sandvik Asia Pvt. Ltd. - Referred [Paras 4,9]

Departmental Clarification Quoted-

C.B.E. & C. Circular dated 30-12-2011 [Paras 2, 4, 9,10,12, 13, 25, 26, 27]

Advocated By -

S/Shri V. Sridharan, Sr. Counsel with Prakash Shah
i/b M/s. PDS Legal, for the Petitioner.
S/Shri Pradeep S. Jetly with },B. Mishra and S.P. Bharati,for the Respondent.

[Judgment per : B.P. Colabawalla, J.]. -

Rule. The Respondents waive service. By consent of parties. Rule made returnable forthwith and heard finally.

2. This Petition under Article 226 of the Constitution of India seeks quashing of the Circular dated 30th December, 2011 issued by the Central Board of Excise and Customs, New Delhi (C.B.E. & C), to the extent that it purports to clarify that an exporter cannot claim the Brand Rate of drawback under Rule 7 of the Customs, Central Excise Duties and Service Tax Drawback Rules, 1995 (hereinafter referred to as the "Drawback Rules"), after having availed of the All Industry Rate of drawback under Rule 3. As a consequence of this, the Petitioner has also challenged the Order-in-Appeal dated 27th September, 2012 passed by the Commissioner of Central Excise (Appeals) - (Respondent No. 3) and the orders/letters dated 19th April, 2012, 11th June, 2012 and 24th July, 2012 issued by the Additional Commissioner (BRU) of Central Excise, Pune-I - (Respondent No. 5).

3. The short question that arises for our consideration is whether the Petitioner, at the time of export of the goods, having claimed/granted drawback at the All Industry Rate under Rule 3 of the Drawback Rules, is entitled to make an application seeking determination of the Brand Rate of drawback in terms of Rule 7 thereof and claim the differential amount.

4. Before proceeding further, we need to deal with the preliminary objection raised with reference to the maintainability of this Writ Petition. Mr. Jetly, the learned counsel appearing on behalf of the Respondents, submitted that the present Writ Petition is not maintainable and/or ought not to be entertained, as the Petitioner had not exhausted the alternate remedies available to it under the provisions of the Customs Act, 1962 (the Act). In particular, Mr. Jetly submitted that under the provisions of Section 129DD of the Act, the Petitioner had an al-ternate remedy to challenge the order passed by Respondent No. 3 by filing a Revision before the Joint Secretary, Government of India. Admittedly, the Petitioner had not exhausted the aforesaid remedy and in view thereof, the Writ Petition deserved dismissal, was the submission. It is true that the Petitioner has not availed of the alternate remedy as per Section 129DD. However, on a perusal of the order dated 27th September, 2012 passed by Respondent No. 3, we find that one of the main reasons for not entertaining the applications of the Petitioner seeking determination of the Brand Rate of drawback under Rule 7, was due to the clarification contained in the Circular dated 30th December, 2011 issued by the C.B.E. & C, and which has been impugned in this Writ Petition. Admittedly, there is no remedy under the Act or the rules to challenge the said Circular and the same would have to be by way of the present proceedings. If the Circular is struck down, then the orders impugned herein would also automatically perish. "It is now trite law that the availability of an alternate remedy is not an absolute bar to the entertainment of a writ petition, but is a matter of discretion. In the ordinary course, this Court would refuse to issue a high prerogative writ when alternate remedies are available. However, these limits or constraints in issuing high prerogative writs when alternate remedies are available, are self-imposed by the Courts and there is no absolute bar in exercising writ jurisdiction merely because an alternate remedy is available, if the facts so warrant. In the present case, the facts are really undisputed. The entire controversy revolves around the interpretation of Rule 3 vis-a-vis Rule 7 of the Drawback Rules and whether the C.B.E. & C. Circular dated 30th December, 2011 has gone beyond or whittled down the Drawback Rules. In these circumstances, we are inclined to exercise our discretion and entertain this Writ Petition on merits, especially in view of the fact that challenge has been laid to the said Circular and the issues raised herein are purely legal, and more so when there are no disputed questions of fact. We therefore do not think it fit or necessary to put the Petitioner through the mill of statutory appeals/revisions in the hierarchy of the Customs Act, 1962. We also find force in the argument of Mr. Sridharan, the learned senior counsel appearing on behalf of the Petitioner, that in the peculiar facts and circumstances of the present case, availing of the alternate remedy would be an exercise in futility because the revisional authority (under Section 129DD) had already decided this issue on merits in the case of one Sandvik Asia Pvt. Ltd., and which has been relied upon by the Respondent No. 3 in the order impugned herein. For all the aforesaid reasons, the preliminary objection is therefore rejected and we proceed to entertain the Writ Petition on merits.

5. Having rejected the preliminary objection, we now turn our attention to the undisputed facts of the case. The Petitioner is engaged in the business of manufacturing and export of dutiable, excisable goods. For the purpose of manufacture of finished goods, the Petitioner imports various inputs on payment of duty. The Petitioner also procures inputs from indigenous sources on payment of applicable duties. The finished goods are either cleared in the domestic market or exported out of India. The exports out of India are made under claim for duty drawback available under Section 75 of the Customs Act, 1962 read with Drawback Rules. At the time of export of the finished goods, the petitioner files the shipping bill under claim of drawback. The drawback is claimed under Tariff Item 8421B of the schedule to Notification No. 68/2011-Cus. (N.T.), dated 22-9-2011 in terms of Rule 3 of the Drawback Rules. It is common ground before us that this rate is otherwise known as the All Industry Rate of drawback. Thereafter, within the time specified in Rule 7 of the Drawback Rules, the Petitioner makes an application for determination of drawback under Rule 7. Along with the application, the requisite documents/particulars are also furnished. It is also common ground before us that this is known as the Brand Rate of drawback.

6. It is the case of the Petitioner that it is entitled to the Brand Rate of drawback in terms of Rule 7, if the All Industry Rate of drawback notified under Rule 3 is less than 4/5th (80%) of the actual duties suffered on the inputs. Once the Brand Rate of drawback is determined in terms of Rule 7, the amount of drawback so determined, is disbursed after adjusting the amount of drawback already granted/disbursed to the Petitioner under Rule 3. It is not as if the Petitioner gets full drawback under Rule 3 as well as under Rule 7. The Petitioner only gets the difference between the All Industry Rate (under Rule 3) and the Brand Rate (under Rule 7), provided that the All Industry Rate notified under Rule 3 is less than 4/5th (80%) of the actual duties suffered on the inputs.

7. This modus operandi was being followed by the Petitioner for a long period of time and the Revenue was accepting the Petitioner's applications under Rule 7 even after they had claimed drawback at the All Industry Rate under Rule 3. After Verification and scrutiny of the said applications, the Respondents have in the past sanctioned the Brand Rate of drawback under Rule 7 after deducting the drawback already granted/disbursed under Rule 3. This is not disputed by the Respondents.

8. As per the said practice and following the same procedure, the Petitioner, during the period May, 2011 and May, 2012, after export of the finished goods, obtained drawback under Rule 3. Thereafter, the Petitioner filed applications under Rule 7 seeking determination of the Brand Rate of drawback, the details of which are set out in Paragraph 10 of the Writ Petition. However, deviating from its long standing practice, the Revenue for the first time sought to reject the applications filed by the Petitioner under Rule 7 of the Drawback Rules on the ground that the Petitioner had already claimed drawback at the All Industry Rate under Rule 3 and hence the Petitioner was not entitled to now make applications under Rule 7 seeking determination of the Brand Rate of drawback for the very same exports. In light of the aforesaid, Respondent No. 5 by his orders/letters dated 19th April 2012, 11th June 2012 and 30th July 2012 rejected all the applications filed by the Petitioner for fixation of Brand Rate of drawback under Rule 7. These orders/letters have been impugned in this Writ Petition.

9. Being aggrieved by the said orders/letters of Respondent No. 5, the Petitioner filed Appeals before Respondent No. 3 without any success. By his order dated 27th September, 2012, Respondent No. 3 upheld the rejection of the applications filed by the Petitioner and consequently rejected the Appeals. In the said order, Respondent No. 3 relied upon the order passed by the Government of India, Joint Secretary in the case of one Sandvik Asia Pvt. Ltd. involving the identical issue, as well as upon the Circular dated 30th December, 2011 issued by the C.B.E. &C.

10. It is the case of the Petitioner that the impugned order of Respondent No. 3 upholding the rejection of the applications of the Petitioner for determination of the Brand Rate of drawback under Rule 7, as well as the purported clarification of the C.B.E. & C. contained in its Circular dated 30th December, 2011, are entirely without jurisdiction and without the authority of law. This is how the present Writ Petition has come up for consideration before us.

11. Mr. Sridharan, the learned senior counsel appearing on behalf of the Petitioner, submitted that when the exporter initially claims drawback under Rule 3 at the All Industry Rate, he is not barred from making an application under Rule 7 for determination of the Brand Rate of drawback and claiming the differential amount, provided the All Industry Rate notified under Rule 3 and granted to the exporter, is less than 4/5th (80%) of the duties or taxes paid on the materials or components (inputs) or input services used in the production or manufacture of the exported goods. He submitted that this was keeping with the objects of Section 75 of the Customs Act, 1962 that taxes are not to be exported. He submitted that the purpose of granting drawback on duty paid inputs/input services was to neutralize the incidence of tax. This was to ensure that the export of goods out of the territory of India were not put at a disadvantage and remained competitive in an otherwise fiercely competitive international market.

12. The further submission of Mr. Sridharan was that on a conjoint reading of the Drawback Rules and especially Rules 3 and 7 thereof, there was no provision which barred an exporter from seeking determination of the Brand Rate of drawback under Rule 7, merely because the exporter, at the time of export of the goods, had claimed/was granted drawback at the All Industry Rate as notified under Rule 3. He submitted that there being no such prohibition in the Rules, the Circular dated 30th December, 2011, and in particular, Paragraph (d) thereof was ultra vires the Rules and Act. The Circular seeks to impose a prohibition in seeking determination of the Brand Rate of drawback under Rule 7, when drawback at All Industry Rate has been claimed and granted under Rule 3. No such prohibition can be spelt out from the Rules or the Act, is the submission. For all the aforesaid reasons, Mr. Sridharan submitted that the Circular dated 30th December 2011, and in particular, Paragraph (00d) thereof, was required to be struck down by this Court under Article 226 of the Constitution of India. Consequently, the orders impugned in this Writ Petition, and which primarily relied upon the said Circular for rejecting the applications of the Petitioner seeking determination of the Brand Rate of drawback under Rule 7, also have to be set aside.

13. On the other hand, Mr. Jetly, the learned counsel appearing on behalf of the Revenue, submitted that once the exporter avails of the All Industry Rate of drawback as notified under Rule 3, he is deemed to be satisfied with the drawback availed of by him. He is thereafter barred from making any application seeking determination of the Brand Rate of drawback under Rule 7. He submitted that this was the case even if the All Industry Rate of drawback granted under Rule 3 was less than 4/5th (80%) of the duties and taxes paid on the inputs/input services used in the production or manufacture of the exported goods. Keeping in line with the aforesaid argument, Mr. Jetly submitted that the exporter has to decide at the time of the export of the goods whether he wants to claim drawback at the notified rate under Rule 3, or at the Brand Rate under Rule 7. Once he chooses to claim drawback under Rule 3, he thereafter cannot make a claim for the determination of the Brand Rate of drawback under Rule 7. This, according to Mr. Jetly, was clear from an ex facie reading of the Drawback Rules, and therefore the Circular dated 30th December, 2011 issued by the C.B.E. & C, was not ultra vires the Drawback Rules or the Act, but in consonance with the same. He therefore submitted that consequently, the orders impugned in this Writ Petition do not suffer from any infirmity and the Writ Petition deserves to be dismissed.

14. As stated earlier, the only question that needs to be decided by us is whether an exporter who, at the time of export of the goods, has claimed and been granted drawback at All Industry Rate under Rule 3, is barred from making an application for determination of the Brand Rate of drawback under Rule 7, when the amount or rate of drawback determined under Rule 3, or revised under Rule 4, is less than 4/5th (80%) of the duties or taxes paid on the inputs/input services used in the production or manufacture of the exported goods.

15. With the able assistance of the learned counsel for both sides, we have carefully perused the Writ Petition, the annexures thereto, the affidavit in reply filed by the Respondents as well as the relevant provisions of the Drawback Rules and the Act. Section 75(1) of the Customs Act, 1962 inter alia provides for drawback on imported materials used in the manufacture of goods which are exported and stipulates that subject to the other conditions set out therein, where it appears to the Central Government that in respect of goods of any class or de- scription, manufactured, processed or on which any operation has been carried out in India, being goods which have been entered for exports, a drawback would be allowed of customs duties chargeable under the Act on any imported materials of a class or description, used in the manufacture, or processing, or carrying on any operation on such goods, in accordance with, and subject to the Rules notified by the Central Government in that behalf and made under subsection (2).

16. Section 75(2) inter alia stipulates that the Central Government may make Rules for the purpose of carrying out the provisions of sub-section (1) and in particular such Rules may provide for :-

(i) the payment of drawback of the amount of duty actually paid on the imported materials etc.;

(ii) specifying the goods in respect of which no drawback would be allowed;

(iii) specifying the procedure for recovery or adjustment of any amount of drawback which has been allowed under sub-section (1) or interest chargeable thereon;

(iv) production of such certificates, documents and other evidence in support of each claim of drawback as may be necessary;

(v) requiring the manufacturer or other person carrying on any process or other operation on the said goods, to give access to every part of his manufactory, to any Officer of Customs, for the purpose of inspection and verification; and

(vi) the manner and the time within which the claim for payment of drawback may be filed.

The mandate of Section 75 is really to neutralize the incidence of tax on export of goods. The purpose of the section appears to be that taxes are not exported out of India and the exports of Indian goods are not put to a disadvantage and remain competitive in the fiercely competitive in international market.

17. Pursuant to the powers granted to the Central Government under sub-section (2) of Section 75, the Central Government under M.F.(DR) Notification No. 37/95-Cus. (N.T.), dated 26th May, 1995 brought into force the Drawback Rules. Rule 2(a) defines "drawback" in relation to any goods manufactured in India and exported, to mean the rebate of duty or tax, as the case may be, chargeable on any imported materials, or excisable materials, or taxable services, used as input in the manufacture of such goods. The words "excisable material", "export", "imported material", "input service" and "manufacture" are also independently defined in the said Rules, Therefore, subject to certain conditions, Section 75 of the Act read with the Drawback Rules grants drawback of both, customs duties as well as Central Excise duties paid on the raw materials or inputs/input services used in the manufacture of exported goods.

18. Rule 3, which is relevant for our purposes, deals with drawback and reads as under :

"RULE 3. Drawback. - (1) Subject to the provisions of -

(a) the Customs Act, 1962 (52 of 1962) and the rules made there under,

(b) the Central Excises and Salt Act, 1944 (1 of 1944) and the rules made thereunder,
(bb) the Finance Act, 1994 (32 of 1994) and the rules made thereunder, and (c) these rules, a dfawback may be allowed on the export of goods at such amount, or at such rates, as may be determined by the Central Government; Provided that where any goods are produced or manufactured from imported materials or excisable materials or by using any taxable services as input services, on some of which only the duty or tax chargeable thereon has been paid and not on the rest, or only a part of the duty or tax chargeable has been paid, or the duty or tax paid has been rebated or refunded in whole or in part or given as credit, under any of the provisions of the Customs Act, 1962 (52 of 1962) and the rules made thereunder, or of the Central Excise Act, 1944 (1 of 1944) and the rules made thereunder, or of the Finance Act, 1994 (32 of 1994) and the rules made thereunder, the drawback admissible on the said goods shall be reduced taking into account the lesser duty or tax paid or the rebate, refund or credit obtained; Provided farther that no drawback shall be allowed -

(i) if the said goods, except tea chests used as packing material for export of blended tea, have been taken into use after manufacture; (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, or (iii) on jute batching oil used in the manufacture of export goods, namely, jute (including Bimlipatam jute or mesta fibre), yarn, twist, twine, thread, cords and ropes;

(iv) if the said goods, being packing materials have been used in or in relation to the export of -

(1) jute yarn (including Bimlipatam jute or mesta fibre), twist, twine, thread and ropes in which jute yarn predominates in weight;

(2) Jute fabrics (including Bimlipatam jute or mesta fibre), in which jute predominates in weight;

(3) jute manufactures not elsewhere specified (including Bimlipatam jute or mesta fibre) in which jute predominates in weight);

(v) on any of the goods falling within heading 1006 or 2523 of the First Schedule to the Customs Tariff Act, 1975 (51 of 1975);

(2) In determining the amount or rate of drawback under this rule, the Central Government shall have regard to -

(a) the average quantity or value of each class or description of the materials from which a particular class of goods is ordinarily produced or manufactured in India;

(b) the average quantity or value of the imported materials or excisable materials used for production or manufacture in India of a particular class of goods;

(c) the average amount of duties paid on imported materials or excisable materials used in the manufacture of semis, components and intermediate products which are used in the manu-facture of goods;

(d) the average amount of duties paid on materials wasted in the process of manufacture and catalytic agents:
Provided that if any such waste or catalytic agent is reused in any process of manufacture or is sold, the average amount of duties on the waste or catalytic agent reused or sold shall be deducted;

(e) the average amount of duties paid on imported materials or excisable materials used for containing or, packing the export goods;

(ea) the average amount of tax paid on taxable services which are used as input services for the manufacturing or processing or for containing or packing the export goods;

(f) any other information which the Central Government may consider relevant or, useful for the purpose."
(emphasis supplied)

19. The drawback claimed under Rule 3 is known as the "All Industry Rate of Duty Drawback". For a large number of export products, the All India Rale of duty drawback are notified every year by the Central Government after an assessment of average incidence of customs and Central Excise duties suffered on inputs/input services utilized in the manufacture of the said exported products. This facility is generally availed of by the exporters as no proof of actual duties suffered on the inputs/input services used, is required to be produced. After the announcement of the Budget, various Export Promotion Councils/Associations are consulted and their suggestions as well as their requests and justifications for suitable enhancement of rates and also any changes sought in the scheme of the Drawback Table or the entries therein, are taken note of whilst finalizing and announcing the new All Industry Rates and which generally are fixed as, a percentage of the FOB price of the exported goods. Thereafter, the new All Industry Rate of drawbacks are notified every year after factoring in the changes in duty rates effected by the Budget. This is generally the procedure followed whilst arriving at the All Industry Rate and at which rate the exporter can claim drawback under Rule 3. It is for this reason that Rule 3 provides that subject to the provisions of (a) the Customs Act, 1962 and the Rules made thereunder; (b) the Central Excise and Salt Act, 1944 and the Rules made thereunder; (c) the Finance Act, 1994 and the Rules made thereunder; and (d) the Drawback Rules, a drawback may be allowed on the export of goods at such amount, or at such rates, as may be determined by the Central Government. This is obviously, subject to the other provisions set out in Rule 3.

20. Rule 4 deals with the revision of rates and empowers the Central Government to revise the amounts or rates determined under Rule 3. Rule 5 deals with the determination of the date from which the amount or rate of drawback is to come into force and the effective date for application of the amount or rate of drawback. Rule 6 deals with goods where the amount or rate of drawback has not been determined. In effect, Rule 6 comes into play where no All Industry Rate is determined under Rule 3 in respect of any goods. Thereafter comes Rule 7 and with which we are really concerned. Rule 7 deals with goods where the amount or rate of drawback determined is low, and reads as under :-

"RULE 7. Cases where amount or rate of drawback determined is low. -
(1) Where, in respect of any goods, the manufacturer or exporter finds that the amount or rate of drawback determined under rule 3 or, as the case may be, revised under rule 4, for the class of goods is less than four-fifth of the duties or taxes paid on the materials or components or input serxnces used in the production or manufacture of the said goods, he may within sixty days from the date relevant for the applicability of the amount or rate of drawback in terms of sub-rule (3) of rule 5, make an application in writing to the Commissioner of Central Excise or the Commissioner of Customs and Central Excise having jurisdiction over the manufacturing unit, of the (manufacturer) or. of the supporting manufacturer, as the case may be, for determination of the amount or rate of drawback thereof stating all relevant facts including the proportion in which the materials of components or input services are used in the production or manufacture of goods and the duties or taxes paid on such materials or components or input services;

Provided that the Commissioner of Central Excise or the Commissioner of Customs and Central Excise may, if he is satisfied that the manufacturer or exporter was prevented by sufficient cause from making the application within the aforesaid time, allow such manufacturer or exporter to make such application within a further period of thirty days;

(2) On receipt of the application referred to in sub-rule (1), the Commissioner of Central Excise or the Commissioner of Customs and Central Excise, as the case may be, may, after making or causing to be made such inquiry as it deems fit, allow payment of drawback to such exporter at such amount or at such rate as may be determined to be appropriate, if the amount or rate of drawback determined under Rule 3 or, as the case may be revised under Rule 4, is in fact less than four-fifth of such amount or rate determined under this sub-rule.

(3) Where a manufacturer or exporter desires that he may be granted drawback provisionally, he may, while making an application under sub-rule (1), apply to the Commissioner of Central Excise or the Commissioner of Customs and Central Excise, as the case may be, in writing in this behalf in the manner as has been provided in clause (a) of sub-rule (2) of Rule 6 for the applications made under that rule and the grant of provisional drawback shall be considered in the manner and subject to the conditions specified in Clauses (b) and (c) of sub-rule (2) and sub-rule (3) of Rule 6, subject to the condition that bond required to be executed by the claimant shall only be for the difference between amount or rate of drawback determined under Rule 3 or, as the case may be, revised under Rule 4 by the Central Government and the provisional drawback authorised by the Commissioner of Central Excise or the Commissioner of Customs and Central Excise, as the case may be, under this Rule;
(4)
(5) " (emphasis supplied)

21. In a nutshell, what Rule 7(1) stipulates is that where in respect of any goods, the manufacturer or exporter finds that the amount or rate of drawback determined under Rule 3 or as the case may be, revised under Rule 4, is less than 4/5th (80 %) of the duties or taxes paid on the inputs/input services used in the production or manufacture of the said goods, he may within sixty days, subject to the other conditions laid down therein, make an application in writing to the Commissioner of Central Excise or the Commissioner of Customs and Central Excise, for determination of the amount or rate of drawback thereof stating all the relevant facts as required under Rule 7. Rule 7(2) provides that on receipt of an application under Rule 7(1), the concerned authority, after making such enquiries as it deems fit, allow the payment of drawback to such exporter at such rate as may be determined to be appropriate if the amount or rate of drawback determined under Rule 3 or as the case may be, revised under Rule 4, is in fact less than 4/5th of such amount or rate determined under Rule 7(2).

22. As there were representations from the trade that since the procedure of application and issuance of Brand Rate Letters under Rule 7 was cumbersome and took about one or two months, and they remained out of funds and faced financial difficulties, with effect from 1st April, 2003, sub-rule (3) of Rule 7 was inserted. The said sub-rule inter alia provided that where a manufacturer or exporter desired to be granted drawback provisionally whilst making an application under sub-rule (1), he could apply for the same as provided in Rule 6(2)(a), subject to the condition that a bond was required to be executed by the exporter that he shall only claim the difference between the amount or rate of drawback determined by the Central Government under Rule 3, or as the case may be, revised under Rule 4, and the Brand Rate of drawback determined by Commissioner of Central Excise or the Commissioner of Customs and Central Excise, as the case maybe, under Rule 7(2). The grant of provisional drawback would then be considered in the manner and subject to the conditions specified in clauses (b) and (c) of sub-rules (2) and (3) of Rule 6.

23. On a careful and conjoint reading of the aforesaid Rules, we do not find that there is any prohibition set out in the Drawback Rules which debars an exporter from seeking determination of the Brand Rate of drawback under Rule 7, merely because at the time of export, he had already claimed the All Industry Rate of drawback under Rule 3. In fact, to our mind, the Rules seem to suggest otherwise. Firstly, Rule 3 which deals with "drawback", itself stipulates when drawback is not to be allowed [see second proviso to Rule 3(1)]. Despite specifying certain situations when, drawback is not be allowed, we do not find any pro-vision specified therein barring an exporter from seeking a determination of the Brand Rate of drawback under Rule 7, merely because, at the time of export, he applied for the grant of the All Industry Rate of drawback under Rule 3. Secondly, Rule 7 categorically provides that where in respect of any goods, the manufacturer or exporter finds that the amount or rate of drawback determined under Rule 3 is less than 4/5th of the duties or taxes paid on the inputs/input services used in the production or manufacture of said goods, he may make an application within sixty days for determination of the amount or rate of drawback thereof under Rule 7, disclosing all the relevant facts and subject to the other conditions stipulated under Rule 7. The word "finds" appearing in Rule 7 after the words "manufacturer or exporter", ex facie indicates that it is only once the manufacturer or exporter comes to the conclusion that the amount or rate of drawback determined under Rule 3 is less than 4/5th of the duties or taxes paid on the inputs/input services used in the production or manufacture of the exported goods, can he make an application for determining the Brand Rate of drawback under Rule 7. There could certainly be instances where the manufacturer or exporter would not, at the time of export, be able to determine and/or come to the conclusion that the rate of drawback determined under Rule 3 for the specified exported goods, is in fact less than 4/5th of the duties or taxes paid on the inputs/input services used in the production or manufacture of the said exported goods. To cover this difference, Rule 7(1) allows the manufacturer or exporter to make an application in this regard and claim the difference, provided the rate of drawback determined under Rule 3, is in fact less than 4/5th of the duties or taxes paid on the inputs/input services, used in the production or manufacture of the said exported goods. In other words, if the rate of drawback as determined under Rule 3 is more than 4/5th (80%) of the duties
24. In arriving at the above conclusion, we also get assistance by what is stated in Rule 7(3). Sub-rule (3) of Rule 7 inter alia provides that where a person applies for determination of the Brand Rate of Duty Drawback under Rule 7(1), then pending the application, he may provisionally apply for being granted duty drawback as determined under Rule 3 subject to executing a bond as stipulated therein. This position is even accepted by Mr. Jetly. If we were to accept the submission of the Revenue, that once an exporter or a manufacturer was to apply for drawback at the All Industry Rate under Rule 3, he would be debarred from seeking determination of the Brand Rate of drawback under Rule 7, then no exporter at the first instance, would ever apply for drawback at the All Industry Rate determined under Rule 3, and would always apply under Rule 7(1) for seeking determination of the Brand Rate of drawback, along with an application under Rule 7(3) for the grant of provisional duty drawback at the All Industry Rate as determined under Rule 3. This could not have been the intention of the Legislature or the Central government at the time of bringing into force the Drawback Rules. There is nothing else that has been brought to our notice, either in the Customs Act, 1962 or the Drawback Rules, that could even impliedly spell out the prohibition, as sought to be contended by Mr. Jetly. We therefore hold that the manufacturer or exporter is not barred from seeking a determination of the Brand Rate of drawback under Rule 7 merely because, at the time of export, he had applied for and granted drawback at the All Industry Rate as determined under Rule 3. Our view also finds support in the language of the First proviso to Rule 3(1) and far from any prohibition in applying for Drawback in terms of Rule 7. Rule 7 comes into play only in cases where the amount or rate of drawback is low and not otherwise. The apprehension of Mr. Jetly is taken care of by the clear language of Rule 7(1) and the use of the words "determined under Rule 3" or "revised under Rule 4". It is also taken care of by the wordings of sub-rule 3 of Rule 7.

25. Having held so, we now turn our attention to the Circular dated 30th December, 2011 issued by the C.B.E. & C. The relevant portion of said Circular reads as under :-

"2. On examining the matter it is noted that:

(a) As per Rule 7 of the Drawback Rules, 1995, if the exporter finds that the amount or rate of Drawback determined under notified AIR drawback under Rule 3 or 4 is less than four fifth of the duties and taxes suffered on inputs/input services used in manufacture of export goods, he may within specified period apply before the jurisdictional Central Excise Commissioner for determination of amount or rate of drawback (Brand Rate). Here, it must be kept in mind that the AIR drawback determined under Rule 3 or 4 of the Drawback Rules is specified in the Drawback Schedule by notification. The exporter can compare this with the facts of his case and decide if it is less than four fifth of the duties and taxes suffered and also whether he wants to apply for fixation of Brand Rate in his case.

(b) If the exporter chooses to opt for Brand Rate, then the exporter makes declaration in the Shipping Bill mentioning drawback sub serial/Tariff Item Number as 9801. Then, within the specified time from let expert date, the exporter applies for Brand Rate of drawback before the jurisdictional Central Excise authority. During the pendency of this application, the exporter may be allowed the facilitation under the Board's Circular No. 10/2003 subject to necessary conditions.

(c) After the jurisdictional Central Excise authority fixes/sanctions Brand Rate, the matter goes back to the customs at the port of export for making the requisite payment, with reference to the exporter's declaration of having opted for Brand Rate by specifying the drawback Tariff Hem No. as 9801 in the Shipping Bill at the time of export. It is this option that enables the Shipping Bill to be brought back into drawback queue for payment of Brand Rate.

(d) Thus, provisions do not provide that an exporter can avail the AIR Drawback first at the time of export under specified sub serial/TariffItem number of the AIR schedule and then file for determination of the Brand Rate under Rule 7. Exporter's declaration of Tariff Item number other than 9801 on the Shipping bill is declaration that he is satisfied with the AIR rate and opts for it. Any other interpretation would also undermine the entire EDI procedure in this respect."

26. On reading the Circular, and particularly Paragraph (d) thereof, it is clear that the Circular seeks to interpret the Rules to mean that an exporter once having availed the All Industry Rate of drawback at the lime of export, cannot file an application for determination of the Brand Rate of drawback under Rule 7. As discussed earlier, on a plain reading of the Drawback, Rules, we do not find any such prohibition as is sought to be culled out by the C.B.E. & C. in its Circular dated 30th December, 2011. The C.B.E. & C. whilst clarifying the said Drawback Rules, has imposed limitations/restrictions which are clearly not provided for in the Rules, and has the effect of whittling down the Drawback Rules. Under the grab of clarifying the Rules, the C.B.E. & C. cannot incorporate a re-striction/limitation, which does not find place in the Drawback Rules. In Clause (d) of the Circular cannot be reconciled with Clauses (b) and (c) thereof. Hence, read together and harmoniously it will have to be held that the Circular cannot override the Rules and particularly Rules 3 and 7 of the Drawback Rules and the sub-rules thereunder. This being the case, Clause (d) of the said Circular is clearly unsustainable and has to be struck down. On the same parity of reasoning, and more so because the orders/letters impugned herein, rely upon the said Cir-cular to reject the applications of the Petitioner seeking determination of the Brand Rate of drawback under Rule 7, even the said impugned orders/letters will have to be set aside.

27. In view of our discussion in this judgment, Clause (d) of the said Circular dated 30th December, 2011 issued by the C.B.E. & C. as well as the impugned orders dated 27th September, 2012 issued by Respondent No. 3, and the orders/letters dated 19th April, 2012, 11th June, 2012 and 24th July, 2012 issued by Respondent No. 5, cannot be sustained. The rule is, therefore, made absolute and the Petition is granted in terms of prayer Clauses (a) and (b). The Respondents are therefore directed to forthwith accept the applications of the Petitioner as set out in Paragraph 10 of the Petition and process the same as per the provisions of Rule 7 of the Drawback Rules. It is needless to add that if the authorities find that the applications made under Rule 7 do not comply with the provisions of the Rules, the authorities are free to reject the same in accordance with law. The Writ Petition is accordingly disposed off. There shall be no order as to costs.

Equivalent 2014 (309) ELT 0017 (Bom.)