The Export of Flanges manufactured by the process of Forging are eligible for Duty Drawback: Delhi HC [READ JUDGMENT]

Division Bench - Delhi High Court - taxscan

The Division Bench of the Delhi High Court on Friday allowed duty drawback for the export of flanges manufactured by the process of forging. The Court was considering a number of petitions related to denial of duty drawback on “Flanges” manufactured by the Petitioners, by the process of forging and exported from the country.

Duty Drawback is an export incentive which entails providing a rebate on the exports of specified products. The purpose of Duty Drawback is to neutralize the impact of the duties on imports used for manufacturing export products in order to ensure that products manufactured in India are competitive in the international market.

The claim of the petitioners was that the Flanges manufactured by them 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 the said notification. The Respondents, on the other hand, opposed their averments and contended that 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 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.

A division bench comprising of Justices S.Muralidhar and Vibhu Bakhru allowed the claim of the petitioners and took a view that a plain reading of SS 73.29 of the Drawback Schedule 2002-03 and SS 73.28 of the Drawback Schedule 2003-04 makes it clear that Flanges manufactured and exported by the Petitioners are covered under those entries.

The learned judges were of the opinion that 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 the industry as a whole. Thus, there is little scope for calling upon a particular manufacturer to provide proof of the duties actually paid on the materials used by him for manufacture or production of the eligible product, for the purposes of granting duty drawback. The Court further directed the respondents to process the Petitioners’ claims for duty drawback.

Read the full text of the Judgment here.

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