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PJ/Case Laws/2011-12/1229

Whether exemption under Notification No. 32/97 can be denied?
Case:M/s Sierra trading (P) Ltd. versus Commissioner of Customs, Chennai
 
Citation:2011-TIOL-758-CESTAT-MAD
 
Issue:- Duty free import of Inputs under Notification No. 32/97-Cus for jobwork – Drawback/DEPB claimed on export of finished goods - Whether exemption under Notification No. 32/97 can be denied?
 
Brief Facts:- Appellants had imported shoe soles free of duty under Notification No. 32/97-Cus dated 1.4.97 for the purpose of job work and they have exported shoes after satisfying the prescribed value addition of 10%.
 
They claimed drawback on some of the Shipping Bills and DEPB benefit on some others which has been allowed by the Customs Authorities after satisfying themselves that the export value does not include the value of exempted soles received under Notification No. 32/97-Cus.
 
Subsequently Department sought to deny exemption to the appellant under Notification 32/97-Cus by raising demand.
 
Appellant’s Contention:- Appellant stated that they have not claimed drawback and DEPB benefit in respect of the same consignment and they have not claimed such benefits on the value of the material in respect of which exemption has been taken.
 
Appellant further stated that the export value equals only the job charges and not the value of material received from overseas buyer free of cost and free of duty. Hence, there is no question of the appellants availing double benefit as is being contended on behalf of the Revenue.
 
Respondent’s Contention:- Revenue stated that it is the Government's policy not to allow benefits under two different export promotion schemes. They cited Rule 3 of the Drawback Rules which states that drawback is not admissible where exemption has been availed in respect of goods used for export production.
 
Reasoning of the Judgment:- The Tribunal restricted to consider and answer the question that whether the appellants are entitled to exemption under Notification No. 32/97. It was found that Notification No. 32/97-Cus is not conditional upon not availing the drawback/DEPB benefit.
 
The Tribunal noted that reference made to Para 7.12 of the EXIM Policy in another context in relation to imports of patterns, drawings, jigs, tools, fixtures, moulds, tackles, instruments and there is no doubt that Notification No. 32/97-Cus dated 1.4.97 has been issued in the context of the said Para 7.12 of the EXIM Policy. Under DGFT's letter dated 21.8.2001, it has been clarified that as the DEPB scheme works on the principle of “deemed import content”, presuming inputs to be duty-paid, the use of inputs, imported free of cost in terms of Notification No. 32/97 and the resultant product will render such exports ineligible for DEPB benefit. The drawback notifications also stipulate that the rates of drawback schedule shall not be eligible for application to a commodity if such commodity is a manufactured and exported availing the benefit of Customs Notification No. 32/97-Cus. This stipulation is in addition to the restriction in Rule 3 of the Drawback Rules that no drawback shall be admissible if exemption has been availed in respect of inputs.
 
The Tribunal referred to DGFT authorities clarification that imports made under Customs Notification No. 32/97 are for jobbing and exports made using such imports cannot be given DEPB benefits.
 
The Tribunal is of the view that on the face of such clarifications and provisions, the Department at the most, could have taken action not to allow drawback or DEPB benefits to the appellants.
 
However, it was found from the copies of records submitted regarding queries raised, the customs authorities have satisfied themselves that the cost of the soles imported duty-free was not included in the export value and no foreign exchange was paid for the exempted soles and thereafter, they have sanctioned drawback/DEPB.
 
The legal provisions and clarifications issued, as stated above, authorizes the customs authorities not to allow drawback/DEPB on exports made using material imported duty-free under Notification No. 32/97. But there is no restriction in the way of availing the exemption, provided the conditions stipulated in the exemption notification are satisfied regarding 10% value addition etc.
 
In the peculiar facts of this case, the Tribunal is of the view that when the customs authorities have allowed drawback/DEPB benefit and no appeal has been filed against the same but they are denying the exemption under Notification No. 32/97, the appellants are eligible for the customs duty exemption under Notification No. 32/97. Impugned orders set aside.
 
Decision:- Appeals allowed.
 
Comment:- This is peculiar example of department working. The thinking in the mind of field formalities is to give big demands. As such they lose the entire case. Even in this case also, if they have disallowed the drawback/DEPB then case should have been sustained. 
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