In a recent case, the Chennai bench of the Customs , Excise & Service Tax Appellate Tribunal ( CESTAT ) held that non-submission of inventory on denim fabrics is not a ground to disallow DBK claim. The Tribunal upheld the direction to brand rates fixation of duty drawback under Customs Act, 1962.
K.G. Denim Ltd,the assessee was engaged in the manufacture and export of cotton denim fabrics, was availing the facilities of both brand rate of duty drawback scheme as well as DEPB scheme. It appeared that the assessee filed three applications for fixation of brand rate of duty drawback for the drawback of duties suffered on inputs used in the exports made during the year 99–2000.
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A show cause notice was issued by the Commissioner of Customs and Central excise, indicating therein to reject the application filed by the assessee for the reasons inter alia that they had not furnished proof of duty paid inputs declared in DBK III and IIIA statements, they had calculated the yarn consumption for a particular export based on SION which is nothing but a mere arithmetical reverse calculation and not the actual quantity of duty, paid inputs, etc.
The Assessee have filed a detailed reply justifying its claim. Satisfied with the reply filed by assessee and considering the requirements of the procedural Law, the Commissioner per the adjudication Order-in-Original directed the fixation of brand rates of duty drawback in respect of the applications filed by the assessee, by the appropriate authority.
Shri Anoop Singh contended, at the outset, that since the case involved the availing of benefit of DBK, it was for the Respondent to prove that it has fulfilled the statutory requirements. Further, the Original Authority without verifying as to whether in the earlier cases pertaining to the sample sanction orders, the same SION method was followed or not, had permitted by directing the fixation of brand rates of DBK by the appropriate authority.
Per contra, Sri Rohan Muralidharan submitted that the applications were filed along with required statements, documents and enclosures, requesting for fixation of rate of duty DBK and hence, non-submission of inventory for manufacture of denim fabrics could not be a ground to disallow the DBK claim.
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Apart from this, there is no allegation as to any deficiency regarding the submission of data with the corresponding duty paid documents and therefore, the application filed by the respondent were complete in all respects.
Drawing reference to Rule 2(a) of DBK Rules 1995,it was argued that the definition therein does not prescribe that the details of actual materials used must be necessarily provided, since according to him, all India rate of drawback is calculated on the basis of FOB value of the goods and not on the basis of actual inputs used. There is also no mandatory stipulation even in Rule 6 ibid insofar as the actual inputs used are concerned. Therefore, the insistence on the production of details pertaining to actual inputs is baseless.
The primary contention of the Revenue is that it is a statutory requirement that the quantum of inputs which have actually gone into the manufacture has to be determined for ascertaining the DBK amount.
It was alleged that the assessee-respondent instead of producing any such documentary evidence, has only furnished an arithmetical calculation going by the SION, which would only give an approximate weight.
The Original Authority observes that there was sufficient force in the contentions of the assessee since the exporter cannot manufacture exact quantity of fabric required for export under a particular consignment and that the export items are always subject to rigorous quality test and inspection.
It was evident that the incidence of duty suffered at the input stage, in the absence of Modvat/deemed credit benefits should be rebated by way of drawback; when the exact quantity of yarn consumed out of the purchased quantity could not be ascertained under circumstances, like the one in the case on hand.
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It was observed that there has to be a methodology to be adopted, it could be SION norms or any other input output norms as available in textile parlance. SION being an established norms prescribed even by DGFT for the purpose of export – import commerce which is recognized in law, there is no infirmity in applying the same norms in the case on hand.
The two member bench of P Dinesha , Judicial Member and Vasa Seshagiri Rao, Technical Member found that there has been no effort at all made by the Revenue to negate the above findings of the Appellate Authority in any manner.
The Tribunal upheld the impugned order and dismissed the appeal.
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