By TIOL News Service

NEW DELHI, MAY 09, 2016: THE Petitioners claim that Flanges manufactured by them and exported during the period 10th December, 2002 to 6th April, 2003 are covered under SS No. 73.29 under Chapter 73 of the Table of Drawback Rates 2002-03 notified by Custom Notification No. 33/2002 (NT) as amended by Notification No. 80/2002 (NT) dated 10th December, 2002 and the Flanges exported by them after 6th April, 2003 till 30th June, 2003 are covered under SS 73.28 of the Table of Drawback Rates 2003-04 as notified by Notification No. 26/2003 (NT).

The Respondent Commissioner of Customs contests the claim as according to them, Flanges are manufactured by using low grade steel and are, therefore, not covered under SS No. 73.29 or SS No. 73.28 for the purposes of grant of duty drawback. The Respondents further state that the duty drawback rates have been computed on the basis of the data provided by the Forgings Panel of the Engineering Export Promotion Council (EEPC), which did not contain any data regarding Flanges and, therefore, duty drawback at the rates fixed by the Central Government is not available for export of forged Flanges.

In respect of certain shipments, claims made by the Petitioners for duty drawbacks were pending while in certain other cases, claims were sanctioned. Subsequently, show cause notices have been issued calling upon the Petitioners to show cause why their claims should not be rejected and why the drawback claims sanctioned earlier be not recovered. The Petitioners impugn the said show cause notices in these petitions.

Some of the Petitioners have also impugned a letter dated 8th April, 2003 issued by the Joint Secretary (Drawback), Ministry of Finance, Government of India, clarifying that Flanges are not eligible for duty drawback under SS No. 73.29 and 73.30 of the Drawback Schedule 2002-03 and SS No. 73.28, 73.29 and 73.30 of the Drawback Schedule 2003-04. A Petitioner has also impugned the Corrigendum issued by way of a public notice dated 13th May, 2003, inter alia , seeking to correct and rectify SS No. 73.28, 73.29, 73.30 and 73.31 of the Drawback Schedule 2003-04.

The Petitioner contended that the said Public notice seeks to substantially amend those entries; which, according to it, is not permissible as the Drawback Rates have been notified in the Official Gazette in exercise of delegated legislative powers and, thus, cannot be amended by a public notice/circular.

After considering the submissions, the High Court observed -

++ A plain reading of Sub-rule (2) of Rule 3 of the Rules (Customs and Central Excise Duties Drawback Rules, 1995) indicates that the rates of drawback are to be fixed by the Central Government on the basis of averages in respect of industry as a whole. Sub-rule (2) of Rule 3 of the Rules expressly provides that the Central Government shall have regard to the average quantity or value of the materials from which the goods in question are ordinarily produced or manufactured in India; the average quantity of value of imported material or excisable material used for production or manufacture of goods and the average amount of duties suffered on such material; average amount of duties of materials wasted in the process of manufacture; and the average amount of duties paid on materials used for packing export goods.

++ Thus, undisputedly, the duties actually paid on the goods manufactured by a particular exporter are not relevant since the drawback rates are fixed on the basis of the industry mean. The scheme of rate fixation takes into account the duties suffered on the raw materials used by an industry as a whole.

++ In view of Circular No. 23/2001-CUS dated 18th April, 2001, an exporter is only required to satisfy that the exported product falls within the description of the goods as notified by the Central Government in order to claim duty drawbacks at the specified All Industry Rates. It cannot be disputed that the Flanges exported by the Petitioners conformed to the description as specified in SS 73.29 of Drawback Schedule 2002-03 and SS 73.28 of Drawback Schedule 2003-04 inasmuch as, (i) the Flanges were manufactured from carbon steel; (ii) they were manufactured by the process of forging; and (iii) CENVAT credit on the inputs had not been claimed. Thus, the Petitioners would clearly be entitled to duty drawback at the notified rates in respect of the Flanges exported by them.

++ A plain reading of the aforesaid letter (dated 8th April, 2003 issued by the Joint Secretary) indicates that the only reason provided for denial of benefit is that the data in respect of Flanges was not considered by the Government while fixing the All Industry Rates.

++ All Industry Rates for duty drawback as notified by the Central Government are in pursuance of the powers of delegated legislation conferred under Section 75 of the Act read with the Rules. The All Industry Rates of duty drawbacks as fixed by the Central Government are statutory. Thus, we find it difficult to accept that such statutory notifications could be whittled down or amended by an executive circular.

++ Perhaps, the Respondents are also correct in submitting that it was not the intention of the Central Government to confer the benefit of duty drawback for export of Flanges at the rate so notified. However, if the language of the statute is clear and unambiguous, there is little scope to entertain such contentions. It is not open for the Court or the executive to look beyond the plain language of the statute if it is clear and unambiguous.

++ It is trite law that the intention of a statute or a legal provision must be ascertained from the express language of the statute or its necessary implication. In the present case, there is no room in the language of relevant entries to impose additional conditions, other than those expressly stated. Equally, no exclusion can be read in which is not expressly indicated or ascertainable from the plain language of the entries in question.

++ It is not open for a Court, while interpreting any statute, to examine the material which weighed with the authority while framing that law if the provisions of the statute are clear and unequivocal. The scope of the entries in question have to be interpreted on the plain language of the entries, if the same is unambiguous, and it is not open for a Court to interpret the entries in the light of data which may or may not be collected by the Central Government in framing those entries and fixing the All Industry Rates. In the present case, we find that the language of the entries is clear and unequivocal and, thus, there is no room to attempt to discover the intention of the Central Government by taking recourse to any other external aid. (Ratio in Gujarat High Court in Micro Forge (India) Ltd. departed)

Conclusion:

+ The clarification dated 8th April, 2003 has no statutory force. The express language of the Drawback Schedules as notified by Central Government in exercise of statutory powers cannot be diluted or whittled down by the letter dated 8th April, 2003 and, accordingly, the same is liable to be set aside.

+ It is well established that the devices of public notice or circulars cannot be adopted for modifying the substantive provisions of a statutory notification. Contention that the public notice dated 13th May 2003 seeks to make substantial amendments to the express language of the Drawback Schedule 2003-04 with retrospective effect and that too is not permissible is also accepted.

+ More importantly, a benefit granted by a statutory notification cannot be withdrawn with retrospective effect and that too by a device of a public notice. The Petitioners, in the present case, claim to have made exports and priced their shipments on the basis of the Drawback Schedules notified by the Central Government. Thus, in our view, the benefit of duty drawback cannot be denied to them.

The petitions were allowed.

(See 2016-TIOL-895-HC-DEL-CUS)