Back
1991 Supreme(HP) 23
High Court Of Himachal Pradesh
S.RANGANATHAN,N.M.KASLIWAL,S.C.AGRAWAL
CHEMICALS AND FIBRES OF INDIA LTD. - Appellant
Versus
UNION OF INDIA - Respondent
Civil Appeal Nos. 692 and 693 of 1981
Decided On : 02/11/1991
For the appellant :R. B. Habbu, R. B. Hathikhanwala and B. R. Aggarwala, Advocates. For the respondent: Soli J. Sorabjee, Attorney General Kapil Sibal, Additional Solicitor General (Ms. Indu Malhotra, P. Para :meshwaran and C. V. Subba Rao, Advocates with him).
The drawback rates determined by the Central Government took into account both customs and excise duties.
Headnote:
CUSTOMS - Drawback - Entitlement - Assessee imported DMT for manufacture of polyester staple fibre yarn - Yarn sent to Rajasthan for blending with indigenous viscose staple fibre - Blended yarn exported - Assessee claimed full drawback of customs duty paid on DMT - Held, assessee not entitled to full drawback - Drawback rates determined by Central Government took into account both customs and excise duties - Assessee's case did not fall within Rule 7 of Customs and Central Excise Duties Drawback Rules, 1971.
Fact of the Case:
The assessee imported DMT for the manufacture of polyester staple fibre yarn. The yarn was then sent to Rajasthan for blending with indigenous viscose staple fibre. The blended yarn was exported by the assessee. The assessee claimed full drawback of the customs duty paid on the DMT.
Finding of the Court:
The Court held that the assessee was not entitled to full drawback of the customs duty paid on the DMT. The Court held that the drawback rates determined by the Central Government took into account both customs and excise duties. The Court also held that the assessee's case did not fall within Rule 7 of the Customs and Central Excise Duties Drawback Rules, 1971.
Issues: Whether the assessee was entitled to full drawback of the customs duty paid on the DMT.
Ratio Decidendi: The Court held that the assessee was not entitled to full drawback of the customs duty paid on the DMT. The Court held that the drawback rates determined by the Central Government took into account both customs and excise duties. The Court also held that the assessee's case did not fall within Rule 7 of the Customs and Central Excise Duties Drawback Rules, 1971.
Final Decision: The Court dismissed the assessee's appeal.
Ranganathan, J.—These two appeals involve a common question and can be disposed of by a common judgment. The question is whether the appellant companies (hereicafter referred to as the assessees) are entitled to full "drawback" of the customs duty which they had paid on the import of di-methyl-terephthalate (shortly referred to as DMT) for manufacture of polyester staple fibre yarn. The assessees converted the DMT into polyester staple fibre in their factory at Thane and then sent it to Bhilwara in Rajasthan where the Rajasthan Spinning and Weaving Mills blended it with indigenous viscose staple fibre to spin out certain varieties of blended yarn. It is common ground that the product manufactured by this process was exported by the assessees to Imperial Chemical Industries Pvt. Ltd., Singapore, who had supplied the DMT free of charge to the assessees. The answer to the question revolves around the interpretation of section 75 of the Customs Act, 1962 read with the Customs and Central Excise Duty Drawback Rules, 1971.
2. Section 75 of the Customs Act, 1962 empowers the Central Government, by notification in the official Gazette, to direct, in respect of goods of any class or description manufactured in India and exported to any place outside India, that drawback should be allowed of the duties of customs chargeable under the Act on any imported materials of a class of description used in the manufacture of such goods, in accordance with and subject to the rules framed under sub-section (2) of the said section. Sub section (2), which confers a rule making power, enacts that such rules may, among other things, provide: "75 (2) (a) for the payment of drawback equal to the amount of duty actually paid on the imported materials used in the manufacture of the goods or as is specified in the rules as the average amount of duty paid on the materials of that class or description used in the manufacture of export goods of that class or description either by manufacturers generally or by any particular manufacturer". There is a similar provision in section 37 of the Central Excises and Salt Act, 1944 enabling grant of drawback of the excise duty paid in relation to such manufacture.
3. The Central Government framed the Customs and Central Excise Duties Drawback Rules, 1971 (hereinafter referred to as the Rules), in exercise of the powers conferred on it under these two statutes. These are composite rules tinder the above two provisions and enable drawback being availed of w relation to customs duty as well as in relation to duties of central excise. Some relevant provisions of these rules may be quoted here. Rule 3, insofar as it is relevant for our present purposes, reads as follows 2 "3. Drawback.—(1) Subject to the provisions of— (a) the Customs Act, 1962 (52 of 1962) and the rules made thereunder, (b) the Central Excises and Salt Act, 1944 (L of 1944) and the rules made thereunder, and (c) these rules, (a) drawback may be allowed on the export of goods specified in Schedule II at such amount, or at such rates, as may be determined by the Central Government. ***** (2) In determining the amount or rate of drawback under this rule, the Central Government shall have regard to : (a) the average quantity or value of each class or description of the materials from which a particular class of goods is ordinarily produced or manufactured in India, (b) the average quantity or value of the imported materials or excisable materials used for production or manufacture in India of a particular class of goods, (c) the average amount of duties paid on imported materials or excisable materials used in the manufacture of semis, components, and intermediate products which are used in the manufacture of goods, (d) the average amount of duties paid on materials wasted in the process of manufacture and catalytic agents: Provided that if any such waste or catalytic agent is used in any process of manufacture or is sold, the average amount of duties on
