The main legal point established in the judgment is that exporters are entitled to Duty Drawback under Section 75 of the Customs Act, 1962, irrespective of the manufacturing location, and circulars denying the Duty Drawback are contrary to the statutory provisions and the rights vested under the law.

N. Kumar , J.—These appeals are preferred against the order passed by the learned single Judge [2009 (243) E.L.T. 658 (Kar.)] who has declined to interfere with the order passed by the Provisional authority, who has held that the appellants are not entitled to the benefit of Duty Drawback in respect of goods which are manufactured in a 100% Export Oriented Unit. The case of the appellants is that the first appellant is a manufacturer-exporter of ready-made garments. He is entitled to Duty Drawback at the All Industry rate prescribed by the Central Government in exercise of its powers under Section 75 of the Customs Act, 1962 (for short hereinafter referred to as 'the Act') and also in accordance with the Customs and Central Excise Duties Drawback Rules, 1995 (for short hereinafter referred to as 'the Rules'). The second appellant is a 100% EOU.

2. By Circular No. 67/1998-Cus., dated 14-9-1998 to utilize the idle capacity of EOU/EPZ units, the EOU/EPZ units in textile, ready-made garments, agro-processing and granite sectors were permitted to undertake job work from the DTA units, provided the finished products produced by such EOU/EPZ units were exported directly from EOU/EPZ unit itself and these goods are not sent back to the DTA units. The Central Government in exercise of the power conferred by Rule 3 read with Rule 4 of the Rules in supersession of Notification No. 22/1997, dated 30-5-1997 issued Customs Notification No. 67/1998, dated 1-9-1998 determining the rates of drawback as specified in the table annexed thereto. The Drawback was to be paid subject to the conditions specified in the General Notes thereto.

3. The first appellant approached and engaged the second appellant, a licenced and registered 100% EOU Unit for manufacture of ready-made garments. The first appellant supplied raw materials and all other inputs to the second appellant for manufacture of ready-made garments. The second appellant manufactured the said goods on job work basis from and out of the inputs including the fabrics supplied by the first appellant. Permission from the Customs Department was obtained by the first appellant in July 1999 for sending the raw materials to the second appellant for conversion as aforesaid. The second appellant also maintained separate records and registers to show receipts and consumption/utilization of the inputs sent by the first appellant and the removal of the said goods to them. At the time of clearance, shipping bills were prepared in the name of the first appellant as exporters and presented along with the other export documents including the invoices and packing lists to the jurisdictional officers in-charge of the second appellant who in turn forwarded a sealed cover containing invoice, shipping bill, packing list and letter for removal to the jurisdictional officer at the Port of export. The invoices were also attested by the jurisdictional officer in charge of the second appellant and the said goods moved directly from the said units to the Port of export where the same were allowed export by the proper officer under Section 51 of the Act. After such export the first appellant applied for Duty Drawback. Duty Drawback to the extent of Rs.8,56,754/- was allowed. However, the further claim of Rs.19,04,348/- was not considered. Thereafter, the appellants were issued with a show cause notice dated 11-1-2000 asking them to show cause why Drawback ought not to be denied to them on goods that have been manufactured by the second appellant which being a 100% EOU. They cannot claim Drawback as per proviso 2(c) to Notification No. 67/98-Customs, dated 1-9-1998. There was also a demand for drawback already granted and a proposal for imposing penalty on the appellants under Section 75(2) of the Act read with Section 114(iii).

4. The appellants filed the statement of objections. Thereafter, the dispute was adjudicated by the Additional Commissioner of Customs, Bangalore, who by his Order-in-Original dated 30-6-20