Full Judgment Text
* IN THE HIGH COURT OF DELHI AT NEW DELHI
% Judgment reserved on: 05 September 2023
Judgment pronounced on: 15 September 2023
+ W.P.(C) 5986/2023
AJ GOLD AND SILVER REFINERY ..... Petitioner
Through: Mr. Kishore Kunal and
Ms. Ankita Prakash, Advs.
versus
ASSISTANT COMMISSIONER OF CUSTOMS,
(DRAWBACK) & ORS. ..... Respondents
Through: Mr. R. Ramachandran,
Standing Counsel.
CORAM:
HON'BLE MR. JUSTICE YASHWANT VARMA
HON’BLE MR. JUSTICE DHARMESH SHARMA
J U D G M E N T
YASHWANT VARMA, J.
1. The petitioner has approached this Court seeking the issuance
of an appropriate writ commanding the respondents to attend to the
pending drawback claim amounting to Rs. 2,15,48,344/- and for the
aforesaid amount being released along with applicable interest. The
respondents have neither passed a formal order rejecting the claim as
laid before us nor have they released the same in terms of the
application dated 06 May 2015 made in terms of Rule 12(1) of the
1
Customs, Central Excise Duties Drawback Rules, 1995 . However,
it was their stand before us that since the petitioner did not pay any
1
Drawback Rules, 1995
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Basic Customs Duty on the imported articles and merely paid the
additional duty as imposed in terms of Section 3 of the Customs
3
Tariff Act, 1975 , it would not be entitled to the drawback benefits as
claimed.
2. For the purposes of adjudging the validity of the aforesaid
objection, it would be apposite to notice the following facts. The
petitioner asserts itself to be a precious metal refining firm and in
connection with which it imports gold dore bars. During the Financial
Year 2013-2014 it is stated to have imported 5,23,533 grams of gold
dore bars for refining, further manufacturing and sale. It is further its
4
case that the Central Board of Excise and Customs had issued a
Circular No. 36/2010 permitting conversion of free shipping bills from
one scheme to another subject to conditions stipulated therein being
complied with. The petitioner in compliance of the Reserve Bank of
India Circular No. 25 dated 14 August 2013, exported 20% of the gold
dore bars which had been imported in the form of gold jewellery.
3. It is further disclosed that it had during the course of such
export inadvertently failed to submit duty drawback shipping bills
which was required in order to claim drawback benefits and had to the
contrary submitted free shipping bills. It appears to have approached
the respondents for appropriate amendments being made to the
aforesaid free shipping bills in terms of Section 149 of the Customs
2
BCD
3
Tariff Act
4
CBEC
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Act, 1962 . The said permission ultimately came to be granted on 27
February 2015 with the office of the Commissioner of Customs
acceding to the request of the 15 shipping bills in question being duly
amended and being treated as duty drawback shipping bills. It is
thereafter that the petitioner submitted the relevant documents for
disbursal of drawback claims.
4. The record would further bear out that although various
representations in this respect were made, the aforesaid requests were
not acceded to. In the meanwhile, and more particularly on 04
November 2019, the respondent no. 2 issued a Memorandum asserting
that the petitioner would not be entitled to drawback benefits since the
import of gold dore bars had been undertaken without payment of
BCD. It was further asserted by the respondents that the petitioner
had also contravened Condition No. 23 of Notification No. 98/2013
6
dated 14 September 2013 . The petitioner responded to the aforesaid
Memorandum and also participated in a personal hearing which was
granted. However, and since no further action was taken by the
respondents thereafter, it was ultimately constrained to institute the
instant writ petition.
5. Mr. Kunal, learned counsel for the petitioner has contended that
although the gold dore bars had been imported free of BCD in terms
of the relevant scheme which applied, the petitioner had at the time of
import paid additional duty as mandated in terms of Section 3 of the
Tariff Act. The submission was that the payment of such duty which
5
Customs Act
6
Drawback Notification
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is akin to a customs duty would clearly be sufficient to hold the
petitioner eligible to drawback benefits.
6. Mr. Kunal submitted that the respondents have clearly erred in
construing the right of the petitioner to claim drawback being
dependent upon payment of BCD. Learned counsel drew our
attention to the definition of “ drawback ” as appearing in the
Drawback Rules, 1995 to submit that Rule 2(a) clearly and in
unambiguous terms refers to “ duty ” or “ tax ”. It was submitted that
the additional duty that is paid in terms of the Tariff Act would clearly
fall within the ambit of Rule 2(a) and consequently the stand as taken
by the respondents is clearly rendered untenable.
7. It was further submitted that the Drawback Notification had
7
provided for an All-Industry Rate insofar as drawback is concerned
and made no distinction between cases where Central Value Added
Tax had either been claimed or otherwise. According to learned
counsel, since the AI Rate applied, the petitioner stood absolved of
establishing the payment of any additional duties. It was then
contended that the objection as taken by the respondents, namely, of a
violation of Condition No. 23 of the Drawback Notification is also
clearly misconceived since the drawback rates as prescribed for tariff
items 711301, 711302 and 711401 would become inapplicable only in
a situation where the goods manufactured or exported in discharge of
an export obligation was in terms of a scheme which provided for
“ duty free import ”. It was his submission that since the additional
7
AI Rate
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duty as contemplated under Section 3 of the Tariff Act had been duly
paid, there was no justification for the respondents taking the position
that the imports affected by the petitioner were “ duty free ”.
8. Learned counsel further submitted that the nature of an
additional duty which is paid in terms of Section 3 of the Tariff Act
was lucidly explained by the Supreme Court in Hyderabad
8
Industries Ltd. v. Union of India where the following observations
came to be made: -
“12. Section 12 of the Customs Act levies duty on goods imported
into India at such rates as may be specified in the Customs Tariff
Act, 1975. When we turn to the Customs Tariff Act, 1975, it is
Section 2 which states that the rates at which duties of customs are
to be levied under the Customs Act, 1962 are those which are
specified in the First and Second Schedules of the Customs Tariff
Act, 1975. In Section 12 of the Customs Act there is no reference
to any specific provision of the Customs Tariff Act, 1975. In other
words, for the purpose of determining the levy of customs duty on
goods imported into India what is relevant is Section 12 of the
Customs Act read with Section 2.
13. On the other hand levy of additional duty under Section 3 is
equal to the excise duty for the time being leviable on the like
article which is imported into India if produced or manufactured in
India. The rate of additional duty under Section 3(1) on an article
imported into India is not relatable to the First and the Second
Schedules of the Customs Act but the additional duty if leviable
has to be equal to the excise duty which is leviable under the
Excise Act. This itself shows that the charging section for the levy
of additional duty is not Section 12 of the Customs Act but is
Section 3 of the Customs Tariff Act, 1975. This apart sub-sections
(3), (5) and (6) of Section 3 refer to additional duty as being
leviable under sub-section (1). In sub-section (5), for instance, it is
clearly stated that the duty chargeable under Section 3 shall be in
addition to any other duty imposed under this Act or under any
other law for the time being in force.
8
(1999) 5 SCC 15
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14 . There are different types of customs duties levied under
different Acts or rules. Some of them are:
(a) a duty of customs chargeable under Section 12 of the
Customs Act, 1962;
(b) the duty in question, namely, under Section 3(1) of
the Customs Tariff Act;
(c) additional duty levied on raw materials, components
and ingredients under Section 3(3) of the Customs Tariff
Act; and
(d) duty chargeable under Section 9-A of the Customs
Tariff Act, 1975.
The Customs Act, 1962 and the Customs Tariff Act, 1975 are two
separate independent statutes. Merely because the incidence of tax
under Section 3 of the Customs Tariff Act, 1975 arises on the
import of the articles into India it does not necessarily mean that
the Customs Tariff Act cannot provide for the charging of a duty
which is independent of the customs duty leviable under the
Customs Act.
15. The Customs Tariff Act, 1975 was preceded by the Indian
Tariff Act, 1934. Section 2-A of the Tariff Act, 1934 provided for
levy of countervailing duty. This section stipulated that any article
which was imported into India shall be liable to customs duty equal
to the excise duty for the time being leviable on a like article if
produced or manufactured in India. In the notes to the clauses to
the Customs Tariff Bill, 1975 with regard to clause 3 it was stated
that
“clause 3 provides for the levy of additional duty on an
imported article to counterbalance the excise duty
leviable on the like article made indigenously, or on the
indigenous raw materials, components or ingredients
which go into the making of the like indigenous article.
This provision corresponds to Section 2-A of the
existing Act, and is necessary to safeguard the interests
of the manufacturers in India”.
Apart from the plain language of the Customs Tariff Act, 1975
even the notes to the clauses show the legislative intent of
providing for a charging section in the Tariff Act, 1975 for
enabling the levy of additional duty to be equal to the amount of
excise duty leviable on a like article if produced or manufactured in
India was with a view to safeguard the interests of the
manufacturers in India. Even though the impost under Section 3 is
not called a countervailing duty there can be little doubt that this
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levy under Section 3 is with a view to levy additional duty on an
imported article so as to counterbalance the excise duty leviable on
the like article indigenously made. In other words Section 3 of the
Customs Tariff Act has been enacted to provide for a level playing
field to the present or future manufacturers of the like articles in
India.”
9. According to Mr. Kunal, Hyderabad Industries is a binding
authority for the proposition of additional duty paid in terms of
Section 3 of the Tariff Act falling within the broad category of
customs duty. Learned counsel also drew our attention to the decision
rendered by a Division Bench of the Court in Combitic Global
9
Caplet Pvt. Ltd. v. Union of India and Others in support of his
submission that once an AI Rate for drawback comes to be specified,
the assessee stands absolved of establishing an actual sufferance of
duty in order to sustain its claim for drawback benefits. Learned
counsel referred to the following passages from that decision: -
“73. Thus, the next issue which arises for consideration is that the
rate of duty drawback given in column B; which envisages a
situation where cenvat credit has been availed of, concerns only the
customs duty component. The answer to this conundrum is found
in the notes and conditions appended to notification no. 92/2012-
Customs (N.T.) dated 04.10.2012 and notification no. 98/2013-
Customs (N.T.) dated 14.09.2013. Although the 04.10.2012
notification was superseded by the 14.09.2013 notification as the
Central Government, it appears, carried out a fresh determination
of rates of drawback, the notes and conditions more or less
remained the same; in particular, condition no. 6, which reads as
follows:
“(6) The figures shown under the drawback rate and
drawback cap appearing below the column “Drawback
when Cenvat facility has not been availed” refer to the
total drawback (customs, central excise and service tax
component put together) allowable and those
9
2022 SCC OnLine Del 2719
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appearing under the column “Drawback when Cenvat
facility has been availed” refer to the drawback
allowable under the customs component. The difference
between the two columns refers to the central excise
and service tax component of drawback . If the rate
indicated is the same in both the columns, it shall
mean that the same pertains to only customs
component and is available irrespective of whether the
exporter has availed of Cenvat or not. ”
[Emphasis is ours.]
74. A perusal of condition no. 6 would show that “…if the rate
indicated is the same in both the columns, it shall mean that the
same pertains to only customs component and is available
irrespective of whether the exporter has availed of cenvat or not.”
75. It must be stated here that the aforementioned notifications i.e.,
notifications dated 04.10.2012 and 14.09.2013 have been, inter
alia, issued by the Government of India in the exercise of powers
under Section 75(2) of the Customs Act, 1962 and Rules 3 and 4 of
the 1995 Rules and hence, in terms of para 8.3.6 of the HBP, they
would have to be made applicable mutatis-mutandis to deemed
exports. Rule 8.3.6. reads as follows:
“ 8.3.6. Subject to procedure laid down in HBP,
Customs and Central Excise Duty Drawback Rules,
1995 shall apply mutatis mutandis to deemed exports.”
76. Therefore, it is quite evident, since AIR for duty drawback in
respect of the goods in issue is available and the rate stipulated in
columns A and B of the schedule is the same, the condition
stipulated in the 2013 Circular, that duty drawback on customs duty
would be available only upon fixation of brand rate, which, in turn,
is based on actual duty-paid documents, cannot apply to the
petitioner. The said condition contained in the 2013 Circular is
otiose insofar as the petitioner is concerned.
77. In this context, it is important to bear in mind that duty
drawback on customs duty component is calculated based on the
industry average of customs duty suffered on several inputs like
High-Speed diesel (HSD), furnace oil, packing material and other
inputs. Therefore, it is practically not feasible to obtain documents
to show the quantum of customs duty suffered by these inputs, as
some of these inputs i.e., HSD and furnace oil are charged with
duty at the point in time when the import is made by the oil
companies. The entire purpose of providing AIR for duty
drawbacks is to do away with this cumbersome process.”
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10. Controverting the aforesaid submissions, Mr. Ramachandran
contended that the Drawback Rules, 1995 would clearly indicate and
establish that it is only when a duty as prescribed by the Customs Act
has been paid that drawback benefits can be claimed. The submission
in essence was that unless BCD is paid at the time of import, it would
be impermissible for the petitioner to claim drawback benefits. Mr.
Ramachandran laid stress upon the fact that undisputedly, the
petitioner as per its own case, had imported gold dore bars without
paying any duty. In view of the above, it was contended that the claim
as raised in the writ petition was clearly without merit.
11. In order to underline the perceived necessity of a BCD being
paid at the time of import, learned counsel also referred to the
Drawback Notification and more particularly to Condition Nos. 6 and
23 which according to Mr. Ramachandran, would reinforce the stand
of the Department that unless a customs, central excise duty or service
tax liability is borne, no drawback can be granted.
12. Having noticed the rival contentions as addressed, we proceed
to evaluate the claim as laid by the writ petitioner hereinafter. The
Customs Act specifies the duties payable on the import of goods in
Section 12 which constitutes the charging section of that enactment
and reads as follows:-
“12. Dutiable goods .—(1) Except as otherwise provided in this
Act, or any other law for the time being in force, duties of customs
shall be levied at such rates as may be specified under the Customs
Tariff Act, 1975 (51 of 1975), or any other law for the time being
in force, on goods imported into, or exported from India.
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(2) The provisions of sub-section (1) shall apply in respect of all
goods belonging to Government as they apply in respect of goods
not belonging to Government.”
13. Section 3 of the Tariff Act makes the following provisions: -
“3. Levy of additional duty equal to excise duty, sales tax, local
taxes and other charges .— (1) Any article which is imported into
India shall, in addition, be liable to a duty (hereafter in this section
referred to as the additional duty) equal to the excise duty for the
time being leviable on a like article if produced or manufactured in
India and if such excise duty on a like article is leviable at any
percentage of its value, the additional duty to which the imported
article shall be so liable shall be calculated at that percentage of the
value of the imported article:
Provided that in case of any alcoholic liquor for human
consumption imported into India, the Central
Government may, by notification in the Official
Gazette, specify the rate of additional duty having
regard to the excise duty for the time being leviable on
a like alcoholic liquor produced or manufactured in
different States or, if a like alcoholic liquor is not
produced or manufactured in any State, then, having
regard to the excise duty which would be leviable for
the time being in different States on the class or
description of alcoholic liquor to which such imported
alcoholic liquor belongs.
Explanation .—In this sub-section, the expression “the
excise duty for the time being leviable on a like article
if produced or manufactured in India” means the excise
duty for the time being in force which would be
leviable on a like article if produced or manufactured in
India or, if a like article is not so produced or
manufactured, which would be leviable on the class or
description of articles to which the imported article
belongs, and where such duty is leviable at different
rates, the highest duty.”
14. As would be manifest from the above, the provision obliges an
importer to pay an additional duty equivalent to the excise duty for the
time being leviable on a like article if produced or manufactured in
India. It becomes pertinent to note that while the additional duty
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which comes to be levied in terms of Section 3 of the Tariff Act is to
be computed bearing in mind the excise duty which would be leviable
on a like article, it remains a duty which gets attracted at the time of
import. The mere fact that the said additional duty is equated to a
duty of excise which is leviable does not essentially change the
character of that duty as being one other than that which is imposed on
import of articles into India. This position would also clearly flow
from the pertinent observations rendered by the Supreme Court in
Hyderabad Industries where their Lordships significantly observed
that while Section 3 of the Tariff Act may constitute a charging
section distinct and separate from Section 12 of the Customs Act, it
continues to remain in the genre of a customs duty. It was further
pertinently observed that while the two statutes are independent,
merely because the tax under Section 3 of the Tariff Act is imposed on
the import of articles into India, it would not mean that the Tariff Act
could not provide for a levy of duty independent of customs duty.
15. We thus find ourselves unable to sustain the contention of Mr.
Ramachandran who had argued that the levy of an additional duty
would not qualify as a duty. More importantly, we note that Rule 2(a)
of the Drawback Rules, 1995 while defining “ drawback ” provides that
the same would be relatable to goods manufactured in India and
exported and the concept of “ drawback ” being the rebate of “ duty ” or
“ tax ” chargeable on any imported material or excisable materials in
the manufacture of such goods. It is not possible to view the levy
under Section 3 of the Tariff Act as not falling within the ambit of
“ duty ” or “ tax ”.
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16. In terms of Rule 3 of the Drawback Rules, 1995, an exporter is
entitled to claim a drawback on the export of goods at such amount or
rates as may be determined by the Union Government. The Drawback
Rules, 1995 thus employ the words “ duty ” and “ tax ” without
confining the same either to the Customs Act or the Central Excise
Act, 1944. This would inevitably lead us to conclude that as long as
goods have suffered a “ tax ” or “ duty ” at the time of import, the claim
for drawback at the stage of export would be available.
17. We further find that Condition No. 6 of the Drawback
Notification would also not detract from the claim of the petitioner for
drawback benefits. Condition No. 6 is extracted hereinbelow: -
“(6) The figures shown under the drawback rate and drawback cap
appearing below the column "Drawback when Cenvat facility has
not been availed" refer to the total drawback (customs, central
excise and service tax component put together) allowable and those
appearing under the column "Drawback when Cenvat facility has
been availed" refer to the drawback allowable under the customs
component. The difference between the two columns refers to the
central excise and service tax component of drawback. If the rate
indicated is the same in both the columns, it shall mean that the
same pertains to only customs component and is available
irrespective of whether the exporter has availed of Cenvat or not .”
18. As we read Condition No. 6, we find that since in the present
case, an AI Rate had been prescribed, there was no corresponding
obligation placed upon the petitioner to independently prove the
payment of customs or central excise duty or for that matter service
tax. In any case, the scope of Condition No. 6 has been duly
explained in Combitic Global and since undisputedly, it was the AI
Rate which applied, the submissions urged by the respondents on this
score are clearly rendered untenable. We may in this connection also
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note that Condition No. 6 speaks of “ customs component ” which
expression also would have to be understood in the light of what the
Supreme Court had held in Hyderabad Industries .
19. We also find ourselves unable to sustain the submission of the
respondents addressed in the backdrop of Condition No. 23 of the
Drawback Notification for reasons which follow. Condition No. 23
reads thus: -
“(23) The drawback rates specified in the said Schedule against
tariff items 711301, 711302 and 711401 shall not be applicable to
goods manufactured or exported in discharge of export obligation
against any Scheme of the relevant Export and Import Policy or the
Foreign Trade Policy of the Government of India which provides
for duty free import or replenishment or procurement from local
sources of gold or silver.”
20. We find that the said condition would not deprive the petitioner
of the right to seek drawback benefits since the same stands restricted
to goods exported in discharge of an export obligation in terms of the
Export and Import Policy or the Foreign Trade Policy which provides
for “ duty free import” . Once the petitioner had paid the duties as
contemplated under Section 3 of the Tariff Act, it could not be
possibly contended that the goods were imported “duty free” .
Accordingly, and for the aforesaid reasons, we find ourselves unable
to sustain the objections as raised.
21. That only leaves us to consider the issue of interest as raised.
Undisputedly, the free shipping bills were duly amended on 27
February 2015 whereafter the petitioner applied for release of
drawback benefits on 06 May 2015. In terms of Section 75A of the
Customs Act, interest becomes payable upon the expiry of a period of
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one month from the date of making of an application seeking
drawback till such time as the payment is ultimately affected. In the
facts of the present case, therefore, the respondents are also liable to
pay interest which would commence upon the expiry of the period of
one month from 06 May 2015 and would run till such time as the
amount is ultimately paid.
22. The writ petition shall consequently stand allowed. The
respondents are hereby commanded to attend to the claim of the
petitioner for disbursement of drawback benefits as claimed and
release the same with due expedition. The respondents are also held
liable to pay interest thereon to be computed in accordance with
Section 75A of the Customs Act and bearing in mind the observations
made hereinabove.
YASHWANT VARMA, J.
DHARMESH SHARMA, J.
SEPTEMBER 15, 2023
SU
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