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2023 Supreme(Cal) 1018
IN THE HIGH COURT AT CALCUTTA
I.P. MUKERJI, BISWAROOP CHOWDHURY, JJ.
Commissioner of Customs (Airport and Administration), Kolkata & Ors. – Appellants
Versus
Kariwala Industries Limited & Ors. – Respondents
APO 25 of 2021 with WPO 959 of 2013, IA No: GA 2 of 2018 (Old GA 293 of 2018)
Decided on : 25-07-2023
Advocate Appeared:
For the Appellants : Mr. Vipul Kundalia, Mr. Bhaskar Prosad Banerjee, Mr. A. Maity, Ms. Aditi Singhania, Advs.
For the Respondent: Mr. Vipul Kundalia Mr. Siddhartha Lahiri, Advs., Mr. Alok Kumar Banerjee, Ms. Anuradha Sarkar, Advs., Ms. Anupa Banerjee, Ms. Rakhi Purnima Paul, Ms. Shalini Dey, Advs.
A unit in a Special Economic Zone can transfer goods to another unit for manufacture and claim duty drawback on the goods exported by the other unit, provided that the payment for the goods is made in foreign currency.
Headnote:
SPECIAL ECONOMIC ZONE - DUTY DRAWBACK - SPECIAL ECONOMIC ZONE ACT, 2005 - SPECIAL ECONOMIC ZONE RULES, 2006 - CUSTOMS ACT, 1962 - CENTRAL EXCISE ACT, 1944 - CENTRAL EXCISE TARIFF ACT, 1985 - CUSTOMS TARIFF ACT, 1975 - Kariwala, a unit in the Falta Export Processing Zone, claimed duty drawback on goods exported by another unit, Kariwala Industries Ltd. The customs authorities rejected the claim, holding that the two entities were different and that the payment for the goods was not made from a foreign currency account as required by the rules. The High Court allowed Kariwala's writ petition, holding that Kariwala Green Bags was a division of Kariwala Industries Ltd. and not a separate entity, and that the payment in foreign currency through a dedicated account substantially complied with the requirement of the rules.
Fact of the Case:
Kariwala, a unit in the Falta Export Processing Zone, claimed duty drawback on goods exported by another unit, Kariwala Industries Ltd. The customs authorities rejected the claim, holding that the two entities were different and that the payment for the goods was not made from a foreign currency account as required by the rules.
Finding of the Court:
The High Court allowed Kariwala's writ petition, holding that Kariwala Green Bags was a division of Kariwala Industries Ltd. and not a separate entity, and that the payment in foreign currency through a dedicated account substantially complied with the requirement of the rules.
Issues: Whether Kariwala Green Bags and Kariwala Industries Ltd. were different entities.
Ratio Decidendi: The High Court held that the two entities were not different, but rather that Kariwala Green Bags was a division of Kariwala Industries Ltd. The court also held that the payment in foreign currency through a dedicated account substantially complied with the requirement of the rules.
Final Decision: The High Court allowed Kariwala's writ petition and directed the customs authorities to allow the drawback claim.
JUDGMENT :
I.P. Mukerji, J.
1. In this case it would be useful to describe the parties by their names. Kariwala Industries Ltd. (Kariwala) is the respondent writ petitioner. It has its registered office at JI-5, Block-EP, Sector –V, Salt Lake, Kolkata – 700091.
2. Parliament enacted the Special Economic Zone Act, 2005 and made the Special Economic Zone Rules, 2006 thereunder. One of such zones was the Falta Export Processing Zone which is now Falta Export Economic Zone (FEEZ). Kariwala asserts that they got permission to set up a unit there. They called it Kariwala Green Bags Unit-III. They describe it as a division of the company. The Development Commissioner, Falta Special Economic Zone on 1st August, 2005 issued a Letter of Permission (LOP) under Rule 19(2) of the said Rules specifying the items of manufacture permitted to be made by this unit. From time to time this permission was extended till 30th June, 2017.
3. Chapter VI of the said Act conferred special benefit for manufacture in this zone for goods imported into or goods exported out of this zone. An entrepreneur in the Special Economic Zone would be entitled to refund of a part of the duty paid by them under the Customs Act, 1962, Central Excise Act, 1944, Central Excise Tariff Act, 1985 and Customs Tariff Act, 1975 on goods brought from the domestic tariff area (DTA) in the form of exemption, concessions, drawback of duty, if inter alia used as an input in the manufacture of goods by the entrepreneur in the said zone and exported out of the country.
4. The core of the dispute between the parties arose out of the letter dated 21st May, 2009 from the Inspector of Customs, Falta Special Economic Zone to Kariwala Green Bags that the organization had not made any exports during the financial year 2008-2009. Therefore, they were asked to explain their drawback claim on account of utilization of goods procured from DTA as per Rule 34 of Special Economic Zone Rules, 2006. On 17th November, 2009 Kariwala Green Bags replied that they were Unit-III of Kariwala Industries Ltd. Both the organizations were the same. It is true that in the shipping bills Kariwala had been mentioned as the consignor/exporter. Such stipulation did not make any difference in the status of Kariwala Green Bags as the manufacturer and exporter of the goods, they claimed. According to Kariwala, their Unit-III, Kariwala Green Bags procured raw materials from the company. These materials were sent to the unit after payment of excise duty. Unit no.III then manufactured finished goods from these raw materials and exported them to countries like Turkey, France, U.S.A., Netherlands and Tokyo. On this basis Kariwala Green Bags claimed duty drawback in terms of the above rules.
5. However, the shipping bills were drawn in the name of Kariwala.
6. This drawback claim relates to the period April, 2008 to March, 2009. It amounted to Rs.52,67,429/-. According to the respondent writ petitioner, Kariwala Green Bags procured goods from the domestic tariff area. According to the authorities, Kariwala and Kariwala Green Bags were different entities. Foreign exchange was received on export of the goods by Kariwala and not Kariwala Green Bags. The appellants’ point of view is that to get the benefit of drawback the exporter, importer and the recipient of the foreign exchange have to be one entity. Kariwala Green Bags and Kariwala operated through different LOPs.
7. Kariwala strongly denied these allegations and claimed that it had several units or divisions, one of which was Kariwala Green Bags. This unit was part and parcel of the same organization, Kariwala.
8. According to the appellants, these two entities are different. In the shipping bills, the exporter was shown as Kariwala Industries Ltd. with the LOP no. of Kariwala Green Bags. There was violation of Section 50(2) of the Customs Act, 1962 for mis-declaration, it was alleged. Procurement of raw materials by Kariwala Green Bags for exportation by Kariwala Industries Ltd. w
